Under the CARES Act that was passed to help Americans offset the difficulties faced by the COVID-19 pandemic, one of the big beneficiaries were those with student loan debt. Specifically, the CARES Act deferred student loan debt from March through September, meaning that no interest would be accrued during this time and payment would be deferred until fall.
Now, with the country in the midst of a recession and the COVID-19 pandemic dragging into the summer months with no real signs of an end, many are wondering what will happen to student loan debt as we inch closer to the fall. The question becomes all the more important as the student debt problem has become even more significant in these times. However, there is hope that more relief will be granted moving forward, especially after a bill was passed offering more flexibility for those who had received Payroll Protection Plan loans. Could student loan relief be on the horizon as well, especially considering that Congress appears to working on another relief package? Here’s a look at some likely scenarios:
Extended Student Loan Relief
This seems to be the most likely scenario for handling the student loan crisis moving forward. The Democrat-controlled House of Representative’s HEROES Act proposal calls for extending loan relief for another full year. This would mean students wouldn’t be required to make a payment against their loans, and wouldn’t accrue any additional interest on their loans until September 2021. We’re not sure if the Republican-controlled Senate would be quite as flexible, but it’s likely that at least some sort of additional short-term relief is coming, and any future relief will likely be reassessed as necessary.
This is unlikely on a widespread scale, but it could be more feasible on a more targeted and measured scale. For instance, some lawmakers have advocated for canceling any student loan debt that is carried by first responders during the pandemic as part of their reward for stepping up and helping America in its time of need. Others suggest forgiving student loan debt for those who have been out of a job and are unable to pay it back during these times. It’s unlikely that everyone who owes student loan debt will have their debt forgiven – partially and in totality – but on a more targeted basis, it could make sense to forgive a certain amount of debt either as a reward or for those who are out of work and unable to make payments.
Earnings-Based Debt Repayment
Certain politicians advocate eliminating student loan debt for those who are earning less than a certain salary and would be more likely to go into default. A more likely proposal could be to make student loan debt earnings-based. That is, instead of repaying loans in their totality, you’d have to repay loans based on what your salary is. If you’re at a lower salary, you’d pay a lower loan amount and vice-versa. It would take more sweeping student loan reform, but it could be a way of making the process more manageable for all Americans.