Short-term student loan payment break extended possible in next stimulus bill

A bipartisan group of senators released a $ 908 billion bipartisan stimulus proposal that includes $ 4 billion for student loans. The proposal is only a preview, without any details.

[Update: On Friday, December 4, 2020, Secretary DeVos announced a one-month extension of the payment pause and interest waiver until January 31, 2021.]

The $ 4 billion for student loans may cover the cost of a short-term extension of the student loan payment hiatus and interest relief. The amount is not enough for a large amount of student loan forgiveness.

President Trump’s 3-month extension to Dec.31, 2020 cost a total of $ 14.644 billion, according to the US Department of Education. Federal Student Aid Annual Report for Fiscal Year 2020. That’s about $ 160 million a day.

The $ 4 billion in student loan funding would be enough to cover the cost of a 25-day extension.

This would extend the payment break and the interest waiver until a few days after January 20, 2021, when President-elect Joe Biden will be inaugurated. This will give him enough time to issue a decree for a longer extension of the payment break and the interest waiver. It could also give the new Congress enough time to pass extension legislation.

The CARES Act requires the US Department of Education to provide borrowers with at least 6 notices of when their normal payment obligations will resume, beginning two months before the end of the payment break and interest waiver. Some borrowers have already received these notices. However, the US Department of Education has asked the Federal Student Loans Services to withhold required notices until December 8, 2020.

Elizabeth J. Harris