Update: Coronavirus Relief Act Suspends Payments, Halts Collections

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Update: The relief package has now passed into law. It is worth roughly $2 trillion and includes a six-month suspension of all federal student loan payments (until Sept. 30), but contains no direct student loan forgiveness.

Amid the coronavirus outbreak, the Department of Education said it will stop seeking to collect on defaulted student loans and will also refund recent garnishments of tax refunds and Social Security. At the same time, a longer halt to payments may be announced soon, but actual forgiveness seems less likely.

Secretary of Education Betsy DeVos said in a March 25 statement that for “at least 60 days from March 13,” all collections and garnishments on federal student loans in default will come to a stop.

Anyone who recently had their income tax refund, Social Security check or other federal payments garnished due to defaulted loans will now get that money back. The move will result in a “refund [of] approximately $1.8 billion in offsets to more than 830,000 borrowers,” DeVos said.

Repayment pause may happen, but mass forgiveness less likely

Meanwhile, a wider plan for student loan relief was taking shape, with early reporting saying a longer pause in student loan repayment has been agreed upon, although direct forgiveness of student debt now appears less probable.

Inside Higher Ed said legislative summaries of the major economic rescue package moving through Congress include a suspension of all federal student repayment for six months, interest-free, expanding the already-announced two-month repayment moratorium.

However, earlier Inside Higher Ed coverage quoted a Democratic Senate aide as saying the Republicans had rejected calls from the Democrats to offer a set dollar amount of student loan forgiveness. Previously, the Senate Democrats had proposed $10,000 in relief per borrower, while CNBC reported March 23 that House Democrats were shooting for $30,000 per borrower.

Situation still fluid

News reports on March 25 said the Senate had settled on language for the huge economic relief bill, meaning talks will now focus on working out a final draft with the House. Details large and small could still change.

In order to keep up to date, check in regularly to Student Loan Hero’s Coronavirus Information Center for the late-breaking developments and updated advice on what to do with your own student loans.

Note that some of the guidance offered in previous Student Loan Hero posts, while still valid, won’t be as relevant while the coronavirus pandemic continues, but we’ll inform you with fresh information and suggestions on how to deal with student debt during the current situation.

 

Published in News & Policy