Student Loan Relief Options on Table

Washington Watch is written by AACC’s government relations office.

On Saturday, August 8, President Trump signed a presidential memorandum, that, among other things, extended a moratorium on student loan repayment through the end of the year. Until Trump’s action, student borrower relief provisions in the Coronavirus Aid, Relief, and Economic Security (CARES) Act were due to expire on September 30. When the CARES Act was signed into law two weeks after the COVID-19 emergency was declared on March 13, it provided a six-month pause on repaying student loans and other related loan provisions.

The presidential memorandum occurred amidst the backdrop of Congress and the White House failing to agree on another stimulus bill, which likely would address this issue.

Students holding federally guaranteed loans who represent more than 80 percent of federal loan borrowers, were automatically excused from payments and interest. Direct loans as well as income-driven loans were subject to what amounted to administrative forbearance, whereas Perkins Loans, Federal Family Education Loans (FFEL), and private student loans were not. Also included was the cessation of the collection of defaulted federal student loans and all borrowers, whether or not they made any payments during this period, would receive credit for payment toward Public Service Loan Forgiveness.

Not All Borrowers Covered

The American Association of Community Colleges and other groups support extension of these student borrower relief provisions in new COVID-19 stimulus legislation. (AACC supports other changes to make student debt repayment easier, particularly for low-income, low-balance borrowers.) Legislation passed in the House, the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act, and introduced by Democrats in the Senate, the Coronavirus Child Care and Education Relief Act (CCCERA), both extend the moratorium on student loan payments until September 30, 2021. However, 29 bipartisan Attorneys General from States, the District of Columbia and US territories made clear in their letter to Congressional leaders that mere extension, without expansion of the types of borrowers covered,  is not enough. The letter promotes the passage of the Student Loan Fairness Act of 2020, S. 4237, which would provide for student loan relief to both commercially-held federal student loan and institutionally-held Perkins loan borrowers. 

Long-term Solutions

These laws and proposed legislation, even those with more inclusive parameters, only address the immediate economic hardships brought on or exacerbated by the COVID-19 pandemic. Long-term reforms direct at what is expected to be a protracted economic downturn are also on the table.  Some of these views were aired by the panelists of a recently aired event on protecting student borrowers amid the pandemic sponsored by the Urban institute.        

Listing numerous provisions, some already in force, such as no interest accrual, implementation not requiring request or application, covering Perkins and FFEL loans as well as direct loans one of the panelists, James Kvaal, president of The Institute of Student Access and Success noted that “there is no danger of overreacting [to the pandemic in the short-term]” Kvaal added that some actions can be immediately taken to help the most financially needy student borrowers. For example, loan discharge provisions can be immediately implemented, including for students with disabilities, for public service, and for those who attended closed schools. Compelling arguments for forgiveness can also be made to help defrauded students and those earning sub-poverty incomes, Kvaal said.

All the panelists, including Sandy Baum, a fellow at the Urban Institute, and University of Wisconsin-Madison professor Fenaba Addo, agreed that any legislation to help struggling student loan borrowers had to be part of a bigger package to stimulate the economy and target resources to the most vulnerable individuals, including those who did not attend college. Longer-term actions include increased Pell Grant investment and making income-driven repayment plans opt-out rather than opt-in, ideas AACC supports. The reauthorization of the Higher Education Act is the preferred vehicle to tackle these longer-term issues, but new stimulus legislation could serve as the means to deliver short-term as well as some longer-term student debt help.

For more information, contact Jolanta (J.J.) Juszkiewicz, director of policy analysis, at jjuszkiewicz@aacc.nche.edu or David Baime, senior vice president, government relations and policy analysis, at dbaime@aacc.nche.edu.

About the Author

Jolanta Juszkiewicz
is director of policy analysis at the American Association of Community Colleges.