A new stimulus plan for the American economy was introduced in the Senate by Republican leadership on Monday, with college students and parents alike looking closing at what the plan would mean for those taking on, or paying off, student loans.
Rules now in place
Back in March, as the U.S. started gearing up for the economic impacts of coronavirus, payment requirements for federal student loan borrowers were suspended for six months, up until October 2020.
In addition, that relief package waived any interest that would be accrued on loans during that time. For those participating in a loan forgiveness program – people work in service for a set number of years who then get their remaining loans waived – the six months would still count toward their total time served.
For that period of six months, the U.S. Department of Education also paused their collection practices.
As lawmakers work to agree on a second stimulus package for Americans this week, the proposed $1 trillion HEALS Act backed by Senate Republicans as of now does not extend the payment or any additional debt forgiveness.
Instead, starting on October 1st, the proposed deal wouldn’t require borrowers who are out of work to pay their loans. Once that borrower goes back to work – part or full time – the monthly payment could not become more than 10 percent of their income, after deductions for necessities like housing and food.
There are also limits on how much interest could accrue while the borrower continues to be unemployed. Senator Lamar Alexander of Tennessee has also suggested streamlined payment plans.
On the other side of the aisle, the Democrat-led House of Representatives proposed a bill in May called the HEROES Act which, as part of its $3 trillion plan, would pause payments on student loans until September of 2021, and forgive $10,000 in debt to borrowers suffering the most economically.
Senator Kamala Harris, among others, has prioritized student loan forgiveness in addition to other policies like $2,000 monthly stimulus checks for others throughout the economy – not just student loan borrowers.