Tuesday, December 29, 2020

These Student Loans Are Not Covered By DeVos’s Extension Of Relief

  

These Student Loans Are Not Covered By DeVos’s Extension Of Relief


Adam S. Minsky, Esq.

On Friday, Education Secretary Betsy DeVos announced an extension of the moratorium on student loan payments, interest, and collections to January, 31, 2021.

This additional month provides critical relief to millions of student loan borrowers struggling with repayment and averts an imminent “cliff” on December 31, when the relief was originally scheduled to expire. It gives Congress additional time to potentially extend the relief further into 2021 as part of larger stimulus negotiations. And it provides President-Elect Biden, who would be sworn in on January 20, with the opportunity to enact further relief through executive action if necessary.

But not all student loans are covered by DeVos’s extension. Here’s why.

The current moratorium on student loan payments, interest, and collections is a result of the CARES Act — bipartisan legislation that was enacted in March to provide economic relief in response to the COVID-19 pandemic. But the language in the CARES Act limited student loan relief only to government-held federal student loans. This includes federal Direct loans, and a small number of other types of federal loans that were acquired by, or assigned to, the U.S. Department of Education.

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But a large volume of student loans were excluded from the CARES Act’s provisions. Three main categories of loans are excluded:

  • Loans administered by the Family Federal Education Loan (FFEL) program. FFEL loans are federal loans originated by a private lender, but ultimately backed or guaranteed by the federal government. The FFEL program was discontinued in 2010, but there was still many borrowers who are repaying FFEL-program loans.
  • Perkins loans are federal loans originated by colleges and universities. They are neither Direct nor FFEL loans, and are not protected by the CARES Act.
  • Private student loans are purely private with no federal backing, and are issued and administered by banks and other commercial lending entities.

Because DeVos limited the extension of student loan relief to the existing moratorium under the CARES Act, the relief was not expanded to cover these other loan programs.

There is roughly $300 billion in outstanding student loans that are ultimately left out of the relief, according to the Student Borrower Protection Center. Of that, around there is $160 billion in privately-owned FFEL loans, $5 billion in Perkins loans, and $133 billion in private student loans.

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Congressional Democrats have been pushing to expand the CARES Act protections to cover FFEL loans and Perkins loans. Progressive lawmakers have also pushed for broad private student loan forgiveness, as well. The HEROES Act, which passed the House of Representatives on a largely party line vote in May, would have provided for up to $10,000 in private student loan forgiveness for borrowers in economic distress. But so far, these efforts have run into opposition in the Republican-controlled Senate.

A bipartisan group of senators unveiled a new, $900 billion stimulus bill last week designed to revive efforts to reach a compromise on broad economic relief before the end of the year. Included in this proposal is $4 billion dedicated to student loan relief. While this allocation of federal funds could be sufficient to cover an additional extension of the student loan moratorium further into 2021, specific details regarding student debt relief have yet to be disclosed, and it is not yet clear whether the current relief could be expanded to include the other types of student loans.

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