Updated 3/19/20 at 8:00 p.m. to include Senate Republicans' student debt relief proposal.
Senate Republicans on Thursday introduced a $1 trillion stimulus bill to address economic distress during the outbreak and spread of the new coronavirus, including a proposal to halt student loan payments and interest accrual for up to six months. The bill would also protect current students from having to return their loans or Pell Grants if they have to leave school in the middle of a term due to the coronavirus outbreak.
Democrats — led by Sens. Chuck Schumer (D-N.Y.), Patty Murray (D-Wash.), Elizabeth Warren (D-Mass.) and Sherrod Brown (D-Ohio) — introduced their own stimulus package on Thursday that would take student debt relief a step further by canceling the payments of all federal borrowers for the duration of the national emergency brought on by the coronavirus, and ensuring each borrower receives total debt relief of no less than $10,000 following a 90-day grace period at the program's conclusion.
Both bills fall in line with calls to stretch relief further than President Donald Trump's plan to waive the interest accrual on federally-held loans announced late last week. The Democrats' bill is part of a larger $750 billion COVID-19 bill package — the third in a multi-phase plan. These proposals come after two other aid packages were passed by Congress: an $8 billion bipartisan bill signed into law earlier this month, and a more than $100 billion package, the Families First Coronavirus Response Act, signed by Trump Wednesday evening.
"The coronavirus outbreak brought with it crushing economic uncertainty, and students and borrowers need targeted, quick relief from payment burdens," Schumer said in a statement. "Our new proposal would immediately cancel monthly payments, and give students and borrowers a minimum [$10,000] student loan payoff. We must act now to help alleviate the growing financial strain on students and families across the country."
Specifically, the lawmakers proposed Congress authorize the Department of Education (ED) to make the monthly payments on behalf of federal student loan borrowers — including those with Direct Loans and Federal Family Education Loans (FFEL) — while ensuring that those payments still count toward a borrowers' progress for loan forgiveness and rehabilitation, and are considered tax-free. For borrowers who are in default on their loans, the lawmakers proposed to cease wage garnishment and involuntary debt collection while ED is making their payments. After the program's conclusion, according to the bill, borrowers whose monthly payments did not exceed a minimum of $10,000 in debt relief will be compensated up to that amount.
The bill would also codify Trump's waiver of the interest accrual on federal student loans, and extend it to include all FFEL loans.
"These are incredibly uncertain and challenging times. Families and student loan borrowers desperately need our help right now and we're only just at the beginning of the devastating economic impact of this crisis," Murray said in a statement. "Our legislation would provide immediate relief for borrowers who are struggling to make payments."
Under the measure, ED will be required to provide monthly notices to all borrowers that will give them the ability to opt-out of the suspension of payments and contribution from the federal government. Additionally, the notice will inform all borrowers that the program is temporary and will come to an end when the national emergency is halted, helping to make sure borrowers don't miss payments once the program comes to an end.
Following the program's conclusion, ED will institute a 90 day "grace period" during which missed payments will not result in fees, penalties, or a negative impact on a borrower's credit.
Warren noted that the proposal is critical, as student loan borrowers were hit hard during the last economic recession.
"Last time our economy crashed, this country made a devastating mistake: we turned our backs on students and families to bail out the giant banks," Warren said in a statement. "Student loan borrowers — especially students of color — never fully recovered from that economic punch to the gut."
Both Warren and Rep. Ayanna Pressley (D-Mass.) earlier this week called on congressional leadership to include student debt cancellation in the next coronavirus relief package.
Republican lawmakers have previously balked at the idea of canceling student loan debt, though the national emergency could change their views on the matter. Schumer said Thursday that he would work with Senate Majority Leader Mitch McConnell (R-Ky.) in an attempt to strike an agreement between the two proposals.
The Center for Responsible Lending (CRL) applauded Democrats' proposal in a statement, with CRL's Director of Federal Advocacy Ashley Harrington saying the plan "is paramount if we want to quickly provide much needed relief for borrowers who are greatly impacted by this public health epidemic."
"Even $10,000 of canceled debt would be profound for many borrowers, especially the 29 million whose student loan debt would be substantially reduced by this plan," she added.
Toby Merrill, director of the Project on Predatory Student Lending, also praised the proposal, saying it presents the opportunity "to save millions of borrowers from financial ruin by providing relief during this uncertain time."
"This need is even more urgent for borrowers who have been cheated by for-profit colleges," Merrill said. "At a time when Congress is considering those most vulnerable during an economic crisis, we urge government leaders to remember that students targeted by for-profit schools are the same people who will suffer the most during and after this economic crisis."
Publication Date: 3/19/2020