The second coronavirus stimulus is largely expected to come sometime later this month. The main talking points so far are stimulus checks and unemployment benefits. Though not much talked about, there is one more segment that lawmakers could focus on with the next coronavirus stimulus, and that is student loans.
How next coronavirus stimulus affects student loans?
The CARES Act, which was passed in March, suspended payments and interest on student loans until September 30. There are still a couple of months left until that expiry date. But, considering the next stimulus bill will likely be the last, any decision on student loans would come in this coronavirus stimulus bill only.
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Congress likely has three options to deal with student loans. First is to let the CARES Act suspension expire and do nothing. This means that the interest and payment on the student loan would resume in October.
In such a scenario, borrowers struggling due to unemployment or lost income would find it very hard to continue with the payment. The only option for such borrowers would be to contact the lender and request for some leniency.
The second option that Congress has is to extend the suspension. Many politicians have favored extending the student loan payment and interest suspension for another year. With rising coronavirus cases in many U.S. states, many argue that it could take some time for the economy to recover. Thus, suspending the student loan would free up cash for the borrowers to put into the economy.
The HEROES Act, which has already been approved by the House of Representatives, proposes to extend the student loan payment and interest suspension through September 30, 2021.
Congress may approve student loan forgiveness
The third option that Congress has is to approve student loan forgiveness. Before the CARES Act was passed, many were in favor of $10,000 in student loan forgiveness. However, the proposal wasn't included in the bill.
Many still support student loan forgiveness to be part of the next coronavirus stimulus, including Democratic presidential nominee Joe Biden. Also, John King, former Obama Education Secretary, urged Congress to come up with debt cancellation for the struggling student borrowers.
President Donald Trump may also support the idea of student loan forgiveness. Trump, during the 2020 Democratic presidential primary, was said to be considering a student loan forgiveness plan to take on the plan by Senator Bernie Sanders and Elizabeth Warren. Also, he was among the first to propose the suspension of student loan interest and payments when the pandemic started.
It remains to be seen what Congress decides on student loans when it comes to the next coronavirus stimulus. Much would depend on Senate Majority Leader Mitch McConnell. He doesn’t seem much in favor of such proposals, but may give his assent under pressure from the White House.