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Many Americans are eagerly awaiting news regarding the potential second round of stimulus checks that is contained in the new Health and Economic Recovery Omnibus Emergency Solutions (HEROES Act).
But this proposed $3 trillion stimulus package could contain a lot more aid than simply issuing out another round of direct payments from the IRS.
One of the areas that individuals will be able to benefit in is student loan repayments.
There are several provisions in the bill that could help free up cash for those currently facing costly student loan bills.
The CARES Act suspended all payments due on certain federal loans until September 30, 2020, such as non-defaulted Direct Loans and FFEL loans currently owned by the Department.
In fact, auto debit payments were suspended beginning March 13, 2020.
But the new HEROES Act would extend this payment suspension until September 2021.
The suspension would include all payments, interest, and collections on government held federal student loans but would be extended to commercially-held FFEL-program federal student loans and Perkins loans.
Granting this extension could save many people thousands of dollars over the next year which could be a lifesaver, especially if they have been laid off or faced with reduced revenue or hours.
In many cases, this could be even more beneficial than a stimulus check.
Student loan forgiveness
Initially, House Democrats wanted to forgive $10,000 in loans for virtually all student loan holders.
This was a major drop down from the $30,000 in student loan forgiveness that was initially suggested but even the $10,000 in loan forgiveness proved to be too expensive and they amended the proposal last week so that only “economically distressed” borrowers could qualify for the $10,000 forgiveness.
These would be borrowers who pay zero dollars a month on their loans due to their income-based repayment program or are in default, or serious delinquency, forbearance, or deferment.
Some people may question why forgiveness would be focused on individuals who already are not paying anything since that would not free up cash and not provide an immediate cash flow benefit.
For that reason, I question whether or not the student loan forgiveness will pass — it just doesn’t seem directly related to stimulating the economy right now as currently drafted.
Public service loan forgiveness
There could also be changes to the way that the public service loan forgiveness PSLF program works.
In the past, if individuals chose to consolidate their commercially held FFEL program federal student loans and Perkins loans, their prior payments would not count towards the forgiveness. It sounds like the new HEROES Act would allow payments made prior to consolidation count.
So it sounds like the student loan forgiveness benefits won’t be quite as lucrative as they initially were proposed. The forgiveness limits were much higher and the eligibility was much broader but those proved to be too expensive.
Still, there are still some really valuable proposals here for the masses. The potential one-year extension of the suspension of payments could be huge for a lot of people and it’s great that interest is also suspended during that time.
Also, some individuals struggling to pay their student loans may be able to benefit if these things go through but that is still a big “if” at this point.
To me, the most likely provision to pass would be the extension of the suspension of payments. The other benefits just don’t seem directly related to stimulating the economy during the immediate future. But we will just have to see how things play out.
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Daniel Gillaspia is the Founder of UponArriving.com and creator of the credit card app, WalletFlo. He is a former attorney turned full-time credit card rewards/travel expert and has earned and redeemed millions of miles to travel the globe. Since 2014, his content has been featured in major publications such as National Geographic, Smithsonian Magazine, Forbes, CNBC, US News, and Business Insider. Find his full bio here.