This congressman wants to expand protection for student loan borrowers who are not covered by the CARES law.
Here’s What You Should Know.
Rep. Elise Stefanik (R-NY) introduced new congressional legislation that would extend protections for student loan borrowers who do not benefit from the $ 2 trillion CARES Act stimulus package. The proposed bipartisan bill, known as the Equity in Student Loan Relief Act, would make student loan borrowers with Federal Family Education Loan (FFEL) eligible for the benefits offered under the CARES Act.
“While the CARES Act has disrupted student loan payments of millions of Americans whose lives have been left behind by the COVID-19 crisis, too many borrowers have been left behind,” Stefanik said. “For all students on a federal student loan, their monthly payments should be suspended regardless of what type of loan they have or when they borrowed the money.”
Why are these borrowers outside the CARES law?
Among other benefits, the CARES Act provides several protections for federal student loan borrowers through September 30, 2020, including:
However, “federal student loans” only include federal student loans owned by the United States Department of Education. This excludes other types of federal student loans that are not owned by the federal government. For example, the two most common are FFEL loans, which were issued by financial institutions such as banks before 2010, and Perkins loans, which are typically owned by colleges and universities. If you have a FFEL or Perkins loan, these loans are not eligible under the CARES law. Stefanik’s legislation would ensure that FFEL loans effectively ‘count’ as federal student loans for the purposes of the CARES law. If signed into law, the legislation could help about 12 million borrowers with FFEL loans, according to the latest statistics on student loan debt.
How it works
The Equity in Student Loan Relief Act, which is just a bill and not a law, would work like this:
- the United States Department of Education, led by Betsy DeVos, would make agreements with the owners of the FFEL loans.
- The agreements would stipulate that all student loan payments would be suspended until September 30, 2020.
- The Education Department would pay any interest payments during this period.
- Also, all involuntary collection of student loans would be discontinued during this period.
As with the CARES Act, FFEL borrowers would be notified of these changes within 15 days, as well as receive at least six notifications before regular student loan payments returned after September 30, 2020. The bill would also, similar to the CARES Act, “count” non-payment of FFEL loans toward student loan forgiveness programs. However, it is worth noting that a borrower with an FFEL loan currently must first consolidate their FFEL loans into a direct consolidation loan before any of the required 120 monthly payments count towards student loan to qualify for the public loan forgiveness program, for example services. forgiveness. It will be interesting how this new legal provision relates to the Public Service Loan Forgiveness Program, so borrowers are fully informed.