COVID-Relief Stimulus Bill & Student Loan Debt
Student Loan Debt Forgiveness: Federal Aid Programs
Is there any financial aid for students with loans during the Coronavirus crisis? There was some student loan relief that came with the first stimulus bill, the CARES Act. More help for people with federal student loans is expected to come after President-elect Biden takes office.
How bad is student debt? Studies show that the average debt for a college student is over $30,000 (based on data from college graduates from the class of 2019). The student loan debt situation has only gotten worse during the COVID-19 pandemic, so what kind of assistance can people expect going forward?
This article explains the student loan relief that was included in the Coronavirus stimulus packages, as well as potential debt forgiveness programs that we may see in the future.
Is Student Loan Debt Relief Part of the Stimulus Bill?
As many Americans are struggling to pay their bills, the federal government came up with some ways to help people dealing with student loan payments. While there are several student loan relief programs to give you a temporary break, none of the stimulus deals include anything that erase or cancel student loan debt.
The First Coronavirus Stimulus Bill
The Coronavirus Aid, Relief, and Economic Security Act (a.k.a. CARES Act) was signed into law on March 27, 2020. About 90% of student loans are eligible for federal assistance under this stimulus bill.
The CARES Act included automatic payment suspensions on federal student loans for six months. Additionally, you will not be charged interest during this 6-month suspension period. To qualify for this loan relief program, the loan must be held by the federal government through the U.S. Department of Education. You can check whether your student loan is eligible by logging into the Federal Student Aid website – the U.S. Department of Education must be the listed owner of your student loan.
As another provision of the CARES Act, employers were permitted to offer up to $5,250 of financial help without it counting as part of their employee’s income. This new rule was effective from March 27, 2020 until the last day of 2020.
The CARES Act also provides financial relief for about 9 million Americans who owe student loan debt. This meant that the federal government did not garnish wages, Social Security benefits, or income tax refunds as collection for student loan debt through September 30, 2020.
What Does the Stimulus Bill Do for Student Loans?
The Coronavirus stimulus package includes some emergency financial aid for college students as well as some other provisions that may impact the way some students pay for college. While these COVID-relief programs are designed to give students a temporary financial break, the stimulus bills do not include anything that erases student loan debt.
The Second Coronavirus Stimulus Bill
The second major stimulus deal, the COVID-Related Tax Relief Act of 2020, was signed into law on December 27, 2020. This package includes a number of programs to make things easier for students struggling financially during the Coronavirus epidemic.
This bill extends a provision so that student loan borrowers will not be taxed when their employers help pay their student loans. This means that employers are permitted to give up to $5,250 of financial help and it will not count as part of their employee’s income.
It also allocates approximately $23 billion to colleges/universities to help those schools provide emergency financial assistance to their struggling students. Furthermore, thanks to the second stimulus package, the Free Application for Federal Student Aid will be simplified and will give earlier notifications regarding how much money a student will receive. More students will also be eligible for the Pell grant.
This stimulus deal did not include an extension of the student loan payment suspension program, which was originally created under the CARES Act in March 2020 (set to expire on September 30, 2020 and then extended by President Trump through December 31, 2020).
Can You Get a Stimulus Check If You Owe Student Loans?
Yes, you will receive a stimulus check even if you owe money on your student loans or taxes. The IRS will not use your stimulus payment to offset any debts you may have to the federal government.
Will Student Loan Debt Be Forgiven?
Many people are hoping that President-elect Biden will do something about student loan debt, which reached $1.6 trillion total in the United States at the end of 2019. Biden has a student loan forgiveness plan, and many are calling for him to cancel student debt altogether.
While there’s a greater chance that a Democrat-controlled Capitol Hill will produce some type of student debt forgiveness legislation (as opposed to a federal government with a Republican majority), there are no guarantees. Lawmakers were eventually able to pass two major stimulus deals during the Coronavirus crisis, but neither bill includes a provision to erase student loan debt.