The Washington PostDemocracy Dies in Darkness

GOP bill ignores calls for extension on federal student loan payment moratorium

(John McDonnell/The Washington Post)
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Senate Republicans unveiled a $1 trillion coronavirus relief bill Monday that failed to extend the suspension of federal student loan payments beyond September, drawing the ire of consumer advocates who are urging Congress to offer more help to the 43 million Americans holding $1.6 trillion in education debt.

“There is a pandemic still happening. Workers are still unemployed. Schools and child-care programs are still closed. It is not yet safe for our economy to fully function,” said Persis Yu, a staff attorney and director of the National Consumer Law Center’s Student Loan Borrower Assistance Project. “This is not relief and fails the 43 million student loan borrowers counting on Congress to act.”

What you need to know about debt relief on student loans

The Trump administration in March gave federal student loan borrowers the option of postponing payments for at least 60 days as the pandemic leveled the economy. Congress extended the timeline through Sept. 30 and made the suspension automatic in the last stimulus package. While the move gave scores of borrowers more breathing room, it excluded millions of others whose federal loans are held by private companies or universities.

Consumer groups lobbied Congress for a more inclusive measure in the second round of relief and pressed lawmakers to cancel a portion of the debt held by borrowers. Congressional Democrats responded with legislation extending the moratorium by a year and proposing $10,000 in loan forgiveness for financially distressed borrowers.

Some advocacy groups criticized the Democrats for limiting loan forgiveness, but others praised the effort and called on the Senate to act after the legislation passed the House. Despite Senate Majority Leader Mitch McConnell (R-Ky.) refusing to take up the bill, a top Republican in the chamber offered up an alternative plan to help borrowers.

Senate Education Committee Chairman Lamar Alexander (R-Tenn.) last week proposed whittling down the nine repayment options to two: one requiring people to repay their loans within 10 years, the other limiting monthly payments to 10 percent of income after accounting for living expenses for up to 25 years.

Alexander said borrowers without income, excluding unemployment, would not have to make payments on their federal student loans come Oct. 1 by relying on the latter plan. Critics say the proposal, which is featured in the GOP bill, is a misguided solution.

People enrolled in federal income-driven repayment plans have long been able to pay zero dollars a month if they earn less than around $19,000. And while simplifying repayment options is a laudable goal, it’s a long-term reform that does not deliver any additional relief during the pandemic, said James Kvaal, president of education nonprofit the Institute for College Access and Success.

“Millions of borrowers are struggling with large debts in the middle of a historic pandemic and recession. It is simply not feasible to establish a new repayment plan and require them all to enroll within two months,” said Kvaal, who served in the Obama administration.

Based on data from the Education Department, the Institute estimates the payment suspension has already saved 18 million borrowers more than $45 billion.