Wednesday, December 23, 2020

UPDATE: Second Coronavirus Relief Package NOT Extending Student Loan Forbearance


At long last, Monday, Congress approved a second coronavirus relief package that includes $600 stimulus checks for many individuals — but no additional student loan forbearance for borrowers.

Back in March, the CARES Act paused federal student loan payments and interest, giving many borrowers a break. Earlier this month, Education Secretary Betsy DeVos extended that forbearance through January 31, 2021.

The new stimulus deal doesn't offer any additional extensions on student loan forbearance, but the current expiration date leaves enough time for President-elect Joe Biden's team to take over in January 2021 and offer additional relief.

When will student loan payments restart?

As of now, student loan repayment is expected to restart after January 31, 2021, meaning no payments will be due and no interest will accrue until that date. For those on income-driven repayment plans, each month of forbearance counts towards the number of payments required for forgiveness.

This forbearance only applies to federal student loans, though some private student loan lenders have offered assistance to affected borrowers on a case-by-case basis. 

What's in the bill for borrowers?

While the new economic relief bill didn't extend forbearance, there are some provisions students and borrowers should be aware of.

The bill makes changes to the federal Pell Grant program for the 2021-2022 school year, allowing a maximum grant amount of $5,435 per student, per year which I will go into further a bit later. 

It also expands a lesser-known benefit of the CARES Act: a tax break for employers that help employees repay student loans up to $5,250 per year of educational assistance.

The CARES Act changed a section of tax code providing a tax break for employers that give educational assistance to employees, adding student loan repayment to that definition. The new stimulus deal extends eligibility for this program through January 1, 2026. Only 8% of employers offered this assistance in 2019, according to data from Society for Human Resource Management, but this extension could increase that figure, the group says.

Will the Biden administration extend student loan forbearance?

President-elect Joe Biden's inauguration on January 21, 2021 could bring additional relief: Biden has discussed student loan forgiveness, and has recommended giving student loan borrowers $10,000 for coronavirus relief. However, it's unclear what the incoming administration will do once in office, and what Congress will agree to.  It is fairly safe to say at the very least, the forbearance will be pushed far past the current January 31 deadline.

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