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How Is Congress Helping Student Loan Borrowers?


It is no secret that student loan debt is a serious drag for many Americans, including those who are middle aged. Collectively, Americans owe almost $2 trillion in student loan debt, and many are paying huge sums each year to cover only interest. The recent COVID-19 pandemic has wiped out income for many of our fellow citizens, who now are scraping by on unemployment insurance or their savings.

Fortunately, Congress has passed many stimulus bills to combat the economic crisis. Recently passed legislation has included provisions to help those who are struggling with their loans.

Pause Student Loan Payments on Federal Loans

The CARES Act contained several provisions related to student loans, but the one that made headlines involves automatically pausing payment on federal student loans for six months. Interest will also not accrue during this period.

Unfortunately, this provision does not apply to privately held student loans, which a large number of students took out. Nevertheless, we encourage debtors to contact their lenders and see if they can work something out. Some private lenders are also suspending payments interest free.

Incentivize Employer Payments

Forbes draws our attention to a little-recognized provision in the CARES Act. This provision permits employers to make up to $5,250 in contributions to an employee’s student loans tax-free. This means that the contributions are exempted from income and payroll taxes, so an employer can lower their overall tax burden by making these contributions.

Of course, the law does not mandate that employers make these contributions. But it is an important benefit that could help employers attract talented employees when they begin hiring again. We hope that Congress reauthorizes this provision when the CARES Act expires in January 2021.

Recommended Cancellation of $10,000 in Debt

The House of Representatives has recently passed the HEROES Act, which also attempts to provide student loan relief to some borrowers. Specifically, the Act would cancel up to $10,000 in student loan debt for borrowers who are “economically distressed.” As explained in this Yahoo article, a borrower would qualify as distressed if they met one of the following:

  • Pay $0 on federal student loans through an income-contingent or income-based repayment plan
  • Are in default on their private or federal student loans for at least 270 days
  • Are in serious delinquency on private or federal loan or are 90 days past due
  • Have loans in deferment or forbearance

One of these conditions must have been met on March 12, 2020. If not, the borrower would not be eligible for the $10,000 in cancellation. The Senate is currently considering whether to sign on the HEROES Act, which was passed by the Democratic majority in the House. Given that the Senate is held by Republicans, some of these provisions might be altered or stripped out entirely.

Speak to Us about Your Student Loan Debt

Recent Congressional action is helpful but does not go far enough. If you are struggling financially, let us analyze whether you can discharge student loans in bankruptcy. Typically, this is hard to do. But there has been no better time to find a sympathetic judge. Contact Nowack & Olson, PLLC today to speak with one of our Plantation bankruptcy lawyers for a free consultation.





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