Stimulus Check Vs. Forgiveness For Students: Which Way To Go?
When coronavirus cases were rising, the Federal Government launched a relief package of almost $2.2 trillion to help provide economic relief to Americans. However, this didn’t cover private loan borrowers. As a result, the Trump Administration is now considering releasing another relief package. Currently, there’s a huge debate on what type of relief should be included in this package.
The opposition, through the HEROES Act, has suggested that the government should provide student loan forgiveness, stimulus checks, and extended forbearance for up to a year on outstanding loans.
What Is The HEROES Act?
The HEROES Act is a $3.3 trillion relief package proposed by the House Democrats. This massive relief package promises the second round of stimulus checks of $1,200 for every eligible individual with up to three dependents, student loan forgiveness, debt relief, hazard pay, $1 trillion aid for state and local governments, unemployment benefits, rental aid, mortgage relief, and so forth.
It also proposes changes to the Federal Government’s Paycheck Protection Program for small organizations.
What Happens If Stimulus Checks Are Announced?
Another stimulus check would greatly benefit the Americans who are still struggling financially. On the other hand, it’ll not be that good for those who were hoping to get student loan forgiveness.
The House Democrats have proposed a one-time stimulus check of up to $1,200 for each eligible American (depending on the annual gross income) and up to $1,200 for each dependent (maximum of three). If this happens, the chances of any student loan forgiveness will be zero.
What If Loan Forgiveness Is Announced?
Although the CARES Act provided multiple benefits to eligible federal student loan borrowers, it failed to be of any help to private student loan borrowers. Current benefits include automated forbearance until September 30, zero-percent interest accrual, and a hold on all collection activities, including wage garnishment and tax refund seizure.
House Democrats, through the HEROES Act, have proposed that these benefits should also cover private student loans. In addition, the forbearance should be extended until the 30th of September 2021. They have also suggested that the government should consider student loan forgiveness ranging between $10,000 to $30,000. This is likely to be approved as the government has to consider the total cost.
Which Is Better?
Almost 45.1 million Americans under the age of 35 hold student loans. That’s around 15% of the total population. If the government was to agree to the House’s proposal, it would cost nearly $450 billion. This amount could fund the third round of stimulus checks for the country, with additional money being left over.
Another factor to consider is that college graduates earn a decent package, and are less likely to have lost their job during this pandemic. Even if they need help, the government is already providing stimulus checks to eligible individuals and dependents. Considering the money involved, stimulus checks are a better relief measure than student loan forgiveness.
When it comes to student loan forgiveness, federal student loan holders are already eligible to apply for public service loan forgiveness (PSLF) and teacher loan forgiveness programs. In addition to these, eligible borrowers can also benefit from existing income-driven repayment plans such as PAYE, REPAYE, and income-based repayments.
If Congress wants to spend money on another relief package, it should consider providing stimulus checks and extending student loan payment suspensions. This way, many Americans will be able to get benefits. Instead of forgiving student loans for a mere 15% of the total population, the Senate should work to build a package that can help all Americans in an equal way.
The HEROES Act is expected to be released during the first week of August. There's a lot of speculation about what will be included and how it’ll impact each American citizen. If the government agrees to provide a second round of stimulus checks alongside other economic stimuli, the proposal for student loan forgiveness won’t be able to make the cut.