Earlier this week, the American Council on Education (“ACE”) wrote a letter to Speaker of the House Nancy Pelosi (D-Calif.) and Minority Leader Kevin McCarthy (R-Calif.) requesting extended student loan relief on behalf of more than 30 higher education organizations. In the letter, which focuses on the likely long-term economic impact of the coronavirus (“COVID-19”) pandemic, ACE requested that Congress extend the benefits of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) to student loan borrowers, through at least June 30, 2021, or until unemployment falls below 8% for three consecutive months. The CARES Act, which was signed into law on March 27, contained a number of provisions intended to provide relief to student loan borrowers, including suspending payments on federally-held student loans until September 30, 2020, interest–free.
ACE made three additional significant requests. First, it called for Congress to make federal student loans eligible for discharge in bankruptcy. Second, it asked for a change to tax law regarding forgiveness under income-driven repayment (“IDR”) plans. Borrowers on IDR plans make student loan payments based on a percentage of their income. After a number of years of repayment (depending on the plan), any balance is forgiven. However, as it currently stands, the forgiven balance is considered taxable income, which can create significant tax burdens for borrowers. ACE called for Congress to change this by making the forgiven balance tax-free. Finally, ACE also requested a zero-origination fee for student loans and a lower interest rate of 1.5%, given the low rates at which the federal government currently is able to borrow.
The organization stressed it believes that “the financial impact on borrowers due to COVID-19 will continue and persist beyond the near-term,” and, as such, it urged Congress to consider these additional measures.