Wednesday, December 23, 2020

DeVos Extends Student Loan Relief Into 2021: What You Need To Know

 


DeVos Extends Student Loan Relief Into 2021: What You Need To Know


Adam S. Minsky, Esq.

Education Secretary Betsy DeVos has extended an existing moratorium on student loan payments, interest, and collections into 2021. The U.S. Department of Education announced the update in a press release on Friday. Here’s the latest.

For much of 2020, millions of student loan borrowers have not had to repay their federal student loans because of emergency pandemic relief under the CARES Act. This legislation suspended all payments and interest on government-held federal student loans. It also stopped all collections efforts — such was wage garnishments and offsets of Social Security benefits — for borrowers in default on their student loans. The student loan moratorium was originally supposed to end in September, but President Trump subsequently extended that relief to December 31.

Congressional Democrats have been pushing to further extend student loan relief well into 2021 as part of larger stimulus negotiations. House Democrats passed legislation that would push the student loan moratorium’s expiration to September 2021. But the Democratic-controlled House and Republican-led Senate have been at an impasse for months. President Trump suggested over the summer that his administration could further extend the moratorium through executive action, but he had not made any recent public comments to affirm this.

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The Department of Education just announced an extension of the student loan moratorium to January, 31, 2021. Citing its authority under the HEROES Act of 2003, the Department said, “Federal student loan borrowers will not be expected to make payments through January of next year, though they will continue to be able to do so and benefit from the 0% interest rate as they pay down principal. Non-payments will continue to count toward the number of payments required under an income-driven repayment plan, a loan rehabilitation agreement, or the Public Service Loan Forgiveness program.”

The additional month of relief for borrowers would avert an imminent “cliff” on December 31 — a potentially disruptive gap after the current relief expires, but before President-Elect Biden is sworn in on January 20, 2021. The resulting uncertainty has led student loan borrowers to scramble to budget for payments, apply for income-driven repayment plans, and consider whether to request hardship deferments or forbearances if they cannot afford their regular payments. Servicers would have started generating reminder notices for student loan bills as early as next week.

“The coronavirus pandemic has presented challenges for many students and borrowers, and this temporary pause in payments will help those who have been impacted," said Secretary DeVos. "The added time also allows Congress to do its job and determine what measures it believes are necessary and appropriate.”

A bipartisan group of senators unveiled a new, $900 billion stimulus bill this week designed to revive efforts to reach a compromise on broad economic relief before the end of the year. Included in this proposal is $4 billion dedicated to student loan relief. While this allocation of federal funds could be sufficient to cover an additional extension of the student loan moratorium further into 2021, specific details regarding student debt relief related to this stimulus proposal have yet to be disclosed.

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Furthermore, after President-Elect Biden is sworn into office on January 20, 2021, he could use executive action to enact additional student loan relief, as well. Consumer rights advocates and progressive Democrats in Congress are pushing Biden to use executive action to enact sweeping student loan relief, including an extended moratorium on payments as well as broad student loan forgiveness. Biden has indicated a willingness to enact some policy changes through aggressive executive action if necessary, but has been largely silent on his position regarding cancelling student debt via executive authority. He has expressed a preference for Congress to take action.

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