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Congressional discussions regarding a potential second stimulus package continue, and the timeline for when new or extended relief may pass is becoming clearer.
By way of background, Congress passed the CARES Act in April in the wake of the economic devastation brought by the Coronavirus pandemic. Although the implementation of the CARES Act has been messy, the CARES Act provided substantial relief to student loan borrowers and millions of other Americans. The legislation suspended payments, interest, and collections on all government-held federal student loans, and also provided a one-time cash payment to Americans as well as enhanced unemployment benefits and small business relief.
The CARES Act had some major flaws, however. The student loan relief provisions were limited to government-held student loans only, leaving out commercially held federal loans, Perkins loans, and private loans. The CARES Act student loan relief is also time limited, and scheduled to expire after September 30, 2020. Other critical economic relief, including enhanced unemployment benefits, payroll support to small businesses, and state moratoriums on evictions and foreclosures, ends even sooner. Meanwhile, Coronavirus cases continue to increase in many states, indicating the pandemic is entering a dangerous new phase.
Congress is facing growing pressure to act, especially with a major national election only a few months away.
Second Student Loan Stimulus: Where Things Stand
In May, the House of Representatives passed the HEROES Act, a massive second stimulus bill. Among the Act’s many provisions were a number of student loan relief programs, including $10,000 in federal and private student loan forgiveness; an extension of the CARES Act suspension of payments, interest, and collections to September 2021; and an expansion of the CARES Act student loan relief to cover commercially-held FFEL-program federal student loans as well as Perkins loans. The HEROES Act would also provide additional cash payments to households, further extend enhanced unemployment benefits, and provide housing assistance.
The bill passed the Democratic-controlled House largely on a party-line vote. Democratic Congressional leaders urged the Senate — controlled by Republicans — to act quickly and pass the HEROES Act. But Senate GOP leaders rejected the bill, declaring it to be “dead on arrival.”
For weeks, Senate Republicans and White House officials sent conflicting signals on whether they thought a second stimulus bill was even necessary. But as the pandemic worsens and the Federal Reserve signals that unemployment is expected to remain high through the end of the year, GOP leadership is now signaling that a second stimulus is likely. The main question at this point isn’t whether there will be a second stimulus, but what will be in it, and when it would pass.
Here’s what we know, based on recent statements made by senior officials in the Senate and the White House:
- Cost: The House-passed stimulus bills would provide over $3 trillion in economic relief. Senate leadership, however, is balking at that cost. Senate Majority Leader Mitch McConnell has said that the price of the next stimulus bill should not exceed $1 trillion. That would significantly limit the type of economic relief that can be provided through any bill.
- Content: Given the cost constraints, assuming Senate Republicans hold their ground, student loan forgiveness in the next stimulus bill seems unlikely at this time. Republicans have not shown any support for student loan forgiveness, and even House Democrats wound up reducing student loan forgiveness in the HEROES Act to drive down the bill’s overall cost. But an extension of the temporary CARES Act student loan relief provisions could prove easier to garner bipartisan support, and could pave the way for a renewed push for student loan forgiveness after the election, since student loans at that point would have been largely unpaid for nearly a year.
- Timing: Congress is now in recess for two weeks. McConnell has signaled that he intends on drafting a Senate stimulus bill by the end of July.
What Happens Next
Congress returns from its recess in two weeks. At that point, Senate Republicans will start drafting legislative language for the second stimulus. Congress will be under intense pressure to pass something by July 31, which is when key elements of the CARES Act (such as enhanced unemployment benefits) expire. But whether something will pass by the end of the month will depend on what, exactly, the Republican-led Senate puts together, whether the Democratic-led House would accept the legislation, and whether President Trump would sign it. It is certainly possible that negotiations could extend into August.
Stay tuned.
Further Reading
Biden Reaffirms Plan To Cancel Student Debt, Reduce Racial Inequality
NAACP And 60 Other Groups Call On Congress To Cancel Student Debt
Would Student Loan Forgiveness Reduce Racial Inequality?
For Student Loan Borrowers, The 2020 Election Has Unprecedented Implications
The CARES Act Was Supposed To Help Student Loan Borrowers, But For Many, It Has Failed
Student Loan Borrowers In CARES Act Forbearance Can’t Buy Or Refi Homes
Veterans’ And Consumer Groups “Heartbroken” After Trump Vetoes Student Loan Relief Bill
Student Loan Servicers Are Dinging Credit Reports For The CARES Act Forbearance
House Passes HEROES Act With Limits On Student Loan Relief – What’s Next?
Here’s What The New Stimulus Bill Does For Student Loan Borrowers
