The ongoing coronavirus pandemic has affected Americans in a variety of ways, especially financially. Many people are still out of work or struggling to get by with reduced incomes, forced to decide where to tighten their belts just to keep the monthly bills paid. Those with student loan debt are especially worried about making timely monthly payments as they navigate the financial hardships of the COVID-19 era. More Americans than ever before are now in need of some level of student loan debt relief.
While the federal government first suspended payments for student loans owned by the Department of Education (including direct loans) in March, those payments were scheduled to resume on February 1st. Now that date has been pushed back to September 30, but unfortunately not all loans qualify. The 9 million borrowers with Federal Family Education Loans (FFEL), Perkins Loans and private loans are not covered under the new payment extension and will thus need to continue making payments.
Borrowers with income-driven repayment (IDR) plans still need to re-certify.
For those registered in an IDR plan, the months where payments are paused still contribute toward the overall number of payments required for loan forgiveness after 10-year, 20-year or 25-year terms. However, these borrowers must re-certify their plans annually to qualify. Recertification includes submitting proof of yearly income, family size, marital status and whether or not your spouse has federal loans. Borrowers in the 10-year Public Service Loan Forgiveness program must also submit annual proof of employment from a qualifying employer.
Is partial student loan forgiveness on the horizon?
For some borrowers, perhaps.
Currently, the majority of proposals are centered around federal student loan forgiveness. House Democrats have pressed to include private loans, though this is unlikely to occur since these loans are between private lenders and student borrowers. Canceling private debt may be something that is either out of the federal government’s reach or simply too difficult to manage.
As with the pause on student loan payments, any forgiveness package will most likely leave out FFEL and Perkins Loans. That said, many in Congress are pushing to include these.
The amount of possible student loan forgiveness is said to be anywhere from $5,000 – $50,000. In early February, Senate Majority Leader Chuck Schumer, Sen. Elizabeth Warren and several other well-known Democrats introduced a resolution calling on President Biden to forgive $50,000 in federal student loan debt for borrowers. The resolution also calls to release these borrowers from any taxes owed on the loan forgiveness.
The resolution currently has over 50 co-sponsors in the House. At this time, the president favors canceling $10,000 of federal student loan debt per person. He prefers this to happen through Congress and not executive action.
Some amount of student loan forgiveness certainly seems to be coming, though the amount and those who qualify are still up in the air. For anyone with a student loan, especially during the current financial crisis, the possibility of additional relief is a flash of much-needed hope. Only time will tell if, and how much of, that relief will come.
If you’re looking for help navigating the complicated world of student loan debt relief, we can help. Feel free to contact us here.