New Details: Bipartisan Stimulus Bill Would Extend Student Loan And Unemployment Relief For Millions

Adam S. Minsky, Esq.

Momentum is building for passage of a new stimulus package, and new information released today about a proposed stimulus bill confirms that it includes a further extension of student loan and unemployment relief.

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.

Last Friday, Education Secretary Betsy DeVos further extended the moratorium by one month, to January 31, 2021. 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. This could have led to confusion for student loan borrowers, and administrative processing delays by servicers.

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Democrats have been pushing to further extend existing student loan relief well into 2021 as part of larger stimulus negotiations. House Democrats passed legislation earlier this year 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.

The new, $908 billion bipartisan compromise package aims to bridge the gap between Senate Republicans’ previous $500 billion stimulus proposal, and a $2 trillion proposal by House Democrats. According to a summary of the compromise bill released today, the current moratorium on student loan payments, interest, and collections would be further extended to April 30, 2021. However, that relief would not be expanded to include around $300 billion in student loans not covered by the existing moratorium, such as commercially-held FFEL loans, Perkins loans, and private student loans. The current relief only covers government-held federal student loans.

Still, the bill, if passed, would provide desperately needed relief to millions of student loan borrowers. According to a recent nationwide survey of 60,000 student loan borrowers completed by Student Debt Crisis and Savi, 77% of student loan borrowers do not feel financially secure enough to resume payments in early 2021. More than half of surveyed borrowers rate their current financial wellness as poor or very poor since the COVID-19 pandemic began in March; only 21% rated their financial wellness as poor or very poor prior to the pandemic. More than a third of healthcare workers with student loan debt who responded to the survey have experienced reduced work hours caused by the COVID-19 pandemic.

“People are deeply concerned about the continuing impact of COVID-19, and their student debt burden is creating uncertainty about the future. The data shows that borrowers are not even close to ready to begin making payments again when relief ends on January 31st. Healthcare workers, educators, and people of color are even less certain of their financial security.” said Natalia Abrams, Executive Director of Student Debt Crisis. “Student debt relief policies are rapidly changing and borrowers want elected officials to know the difficulties they face.”

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The proposal also includes an extension of federal unemployment benefits at $300 per week for 16 weeks. This is less than the $600 weekly benefit amount that Democrats had originally wanted, but with current benefits expiring, supporters of the proposal view it as a reasonable compromise. Also included in the bill is rental relief, and additional funding for small businesses via the Paycheck Protection Program.

It is unclear at this juncture whether the compromise bill has sufficient support to pass the GOP-controlled Senate, but momentum is building. If passed by the Senate, the bill would then have to be passed by the House, controlled by Democrats. House Speaker Nancy Pelosi has expressed support for the bill. President Trump would then have to sign it; the White House has not yet indicated whether he would do so.