WASHINGTON, D.C. – Last week, U.S. Senators Thom Tillis (R-NC), Jack Reed (D-RI), Lisa Murkowski (R-AK), and Doug Jones (D-AL) introduced the bipartisan Student Loan Fairness Act, legislation that would expand the reach of student borrower protections included in the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The bipartisan proposal would allow millions of Americans who were not covered by the CARES Act to make no or smaller monthly student loan payments during the pandemic.
The CARES Act automatically allowed student loan borrowers to suspend all payments on federal loans through September 30, with no interest accruing. To incentivize payments to continue, borrowers who make payments during this time are rewarded with the funds applying directly to their principal rather than interest. And non-payment during this period cannot be used to negatively impact credit scores or qualifications for loan forgiveness. However, these CARES Act benefits are limited to borrowers of student loans that are held by the federal government. This leaves out the borrowers whose Federal Family Education Loans (FFEL) are still held by commercial and state agency lenders, and those with Perkins Loans that are administered by institutions of higher education. As a result, nearly 6 million borrowers were left out under the FFEL Program and another 1.9 million under the Perkins Loan Program. This disparate treatment by loan type is as confusing as it is unfair.
“Americans have experienced major disruptions to their daily personal and professional lives during this crisis,” said Senator Tillis. “While we were able to provide much-needed student loan relief in the CARES Act for many borrowers, this important legislation will bring parity to ensure these federal loan borrowers have the same monthly payment and interest rate suspensions while they adjust to this pandemic.”
Approximately 45 million Americans are currently saddled with over $1.65 trillion in outstanding student loan debt, according to the nonprofit Student Borrower Protection Center (SBPC). The SBPC website also reports that 1-in-4 borrowers are currently behind on their student loans.
The Student Loan Fairness Act (S. 4237) will extend the CARES Act student loan relief to recipients of Perkins loans and commercially-held FFEL loans by covering the cost of interest and suspending monthly payments for the period of March 13 through September 30, 2020, and suspending all involuntary collection, such as administrative wage garnishment or offsets from tax refunds, for this period.
The bipartisan bill will build on the important steps Congress took to provide relief in the CARES Act by ensuring that all federal student loan borrowers have access to this relief.