Alexander threw the plan this week for reporters as “an extension of the deferral of monthly student loan payments until students have an income.” But his plan does not renew the CARES Act student loan itself. Alexander said his goal was to “change the student loan repayment system so that you never have to pay more than 10 percent of your income – after rent and food – on student loans.”
Under those existing repayment options – and under Alexander’s plan – a borrower with no income should not be required to make monthly payments, although interest on the debt continues to rise. “We have a system of no income, no monthly payments,” said the Tennessee Republican.
But the Democrats are already rejecting Alexander’s proposal. Senator Patty Murray, the top Democrat on the Senate’s education committee, planned Alexander’s plan as an “unworkable proposal” that “would reduce the benefits for struggling borrowers during a pandemic and recession.”
“September 30 is imminent – any future COVID aid bill must interrupt payments for all borrowers as our country continues to weather this storm,” said Murray (D-Wash.) In a statement.
A remaining obscurity that looms up during the negotiations is whether the Trump administration would take executive action to provide relief to federal borrowers from student loans. The existing Federal Education Act gives the Minister of Education extensive powers to change the terms of federal student loans during a declared national emergency.
President Donald Trump took swift action in March to use executive measures to suspend interest on most federal student loans when the country first began closing. Education Secretary Betsy DeVos also used her own powers to temporarily stop the collection of defaulted federal loans. Congress soon codified those benefits into the CARES Act and also went a step further in suspending most monthly student loans for about six months.
But it’s not clear whether the Trump administration would use executive action again to stave off the student loan cliff. The White House emphasized in a statement that it aims to encourage legislative action in this area.
“President Trump has provided much-needed help to students and families with student loan loans, both through executive measures and through legislation, and is committed to working with Congress to help those affected by this virus with meaningful help, not with financial support, “said White House spokesman Judd Deere said in a statement to POLITICO.
An official from the education department said the agency had not yet made a decision about a possible extension of benefits. “The department is still assessing the options and is focused on doing the next right thing for students, borrowers and taxpayers,” department spokesman Angela Morabito said in a statement.
About 40 million borrowers are covered by the expiring student loan. Consumer and student advocacy groups have pushed Congress to extend and extend student loan lending, warning that the loss of benefits could lead to an increase in delinquencies and defaults.
“We shouldn’t be talking about whether or not to extend – but how long we want to extend the benefits,” said Whitney Barkley-Denney, a senior policy adviser dealing with student debt at the Center for Responsible Lending.
“We seem to be acting in this fictional universe where Covid is getting better and no worse, and unemployment is getting better and no worse,” she said. “The idea that we are ready to return to payments amazes me.”
Pierce, the former Obama-era CFPB official who now directs policies at the Student Loan Protection Center, said that while much of the congress is “rightly aimed at prolonging unemployment,” the outcome of student loans is also huge economic cliff. “
If the CARES Act benefits are not renewed, Pierce said, “millions of student loan borrowers will be left in the middle of the recession, they will default, damage their credit, and experience tremendous economic downstream impact.”
While Americans with lower levels of education are still much more likely to be unemployed, job losses have risen from about 2 percent in March to 8 percent in April for workers who have at least a bachelor’s degree. About 7 percent of those graduates are still unemployed, according to the latest monthly count from the Department of Labor.
Some Democrats are again trying to include up to $ 10,000 in debt cancellation in the next incentive. Senator Elizabeth Warren (D-Mass.) Has supported the plan, which presumably endorsed Democratic presidential candidate Joe Biden. Democrats are considering incorporating the idea into their party platform.
Home leaders narrowed down their loan waiver provisions in their own promotional bill this year, citing concerns about costs – a last-minute review that angered progressives. Under the plan adopted by the House, only borrowers who are considered “economically distressed” are eligible for relief and not all borrowers.
But outright debt cancellation, as many Democrats propose, remains a difficult sell among GOP lawmakers and Democrats out of more conservative tendencies.
A house voted this month on an amendment that would cancel $ 10,000 per private student loan borrower is a test case. Rep. Madeleine Dean (D-Pa.) Won only two Republican votes and 15 votes from Democrats opposition.
But the extension of the break on monthly student loan payments and zero percent interest benefits enjoys much wider bipartisan support. A separate amendment from Rep. Alma Adams (DN.C.), which would extend the exemption for borrowers of private loans by one year, was adopted by a vote. Both amendments are stuck to the House version of the annual defense policy bill and stand for an uncertain future as the Chamber has to hammer through the differences with the Senate.
In addition, there is a growing twofold interest in expanding the CARES Act student loans to a subset of millions of federal borrowers who were not covered by the law. As many as 9 million borrowers who have federally backed loans from private lenders or their universities were excluded from the benefits.
Inside the House, Rep. Elise Stefanik (RN.Y.), a close ally of Trump, is working with Democrats to sponsor two bills that would extend student loans to all federal borrowers. In the Senate, Jack Reed (DR.I.) and Lisa Murkowski (R-Alaska) unveiled a similar plan this month to bridge the discrepancy between the way different types of federal student loan borrowers are treated and the benefits retroactively expand.
“This legislation is part of what should be a comprehensive student loan debt relief package,” Reed said on the Senate floor when the plan was unveiled. “As the crisis continues, we need to extend repayment until the health and economic conditions improve enough for borrowers to begin repayment.”