With the impact of presidential campaign proposals to deal with student loan debt, the economic crisis of the coronavirus pandemic, and multiple proposals rising in Congress, it seems that student loan changes are in the works. Though Democratic presidential candidates Bernie Sanders and Elizabeth Warren both dropped out of the race, their plans for student debt forgiveness have contributed to general interest in student loans as a hot-button issue, according to CNBC.
The U.S. Department of Education has said that federal student loan borrowers do not need to make loan payments until at least October, with no accrued interest during that time, because of the global pandemic crisis. However, House Democrats are proposing to extend that break in payments even further, until September 30, 2021, with their $3 trillion HEROES Act.
This bill would provide more relief for households and businesses suffering financially during the pandemic and allow those with private student loans to have their loan payments covered by the government until September 2021, with $10,000 of their debt forgiven. The passage and execution of this proposal will be based on how economic recovery is going in the fall, other stimulus spending, and whether there's a level of bipartisan support, according to Forbes.
Higher education expert Mark Kantrowitz told CNBC that it's uncertain that Senate Republicans would allow for such long pause in payments. "But given that 2020 college graduates are graduating into the worst job market ever, I think an extension is likely," he said.
CNBC reported that seven out of 10 college seniors graduate in debt, owing about $30,000 per borrower, according to data from the Institute for College Access and Success. Simultaneously, college costs for tuition along with room and board are rising steadily, with an average of $49,870 for a four-year private college in the 2019-20 school year, according to the College Board. While colleges are still struggling to figure out how to function this fall amidst a global health crisis, debt and rising tuition continue to be issues.
In this time of economic hardship and uncertainty, proponents of the HEROES Act are concerned that private student loan borrowers haven't received federal relief during the pandemic, at a time when the student loan market has outpaced the growth of mortgages, credit cards, and auto loans.
New federal student loans will have historically lower interest rates than before: 2.75 percent for those after July 2020, compared to current rates of 4 to 6 percent.
Democratic presidential candidate Joe Biden has supported student loan forgiveness for borrowers who attended public colleges. In this way, he falls into a growing consensus of those who believe that student loan borrowers should be granted a fresh start and be relieved from the hopeless feeling of being unable to make payments during this time.