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    5 Ways HEROES Act Will Help Your student Loans

    The Federal Government has already announced that all federal student loans are in mandatory forbearance until September 30th, 2020. However, if you aren’t eligible for this relief measure, the proposed HEROES Act might help you tackle repayments if the legislation is approved by both chambers of Congress.

    This $3 trillion stimulus package proposes multiple provisions that will help to repay your outstanding loan balances. 

    Keep reading to learn about the five different ways this Act is designed to help borrowers with outstanding student loan repayments.

    More Borrowers Will Be Getting Relief

    The CARES Act, a $2 trillion stimulus package launched by the Trump-led government, included multiple short-term benefits for unpaid student loan debts. For instance, it allowed all federal student loan payments to be temporarily postponed without any interest accruing during the period. Yet, the problem with this Act is that certain FFEL and Perkins Loans not owned by the Department of Education weren’t qualified for this relief package along with private student loans.

    On the other hand, the recently proposed HEROES Act suggests that all student loans, be it FFEL, Health and Human Services Loans, or Perkins Loans must be eligible for relief. This means that more student loan borrowers will be able to access relief for their unpaid balances during this crisis period.

    There Will Be More Time

    As per the CARES Act, eligible federal student loan payments are postponed for 180 days. So, all such loan holders need to start repayment after September 30th, 2020 at the regular interest rate mentioned in their loan agreements. After this period, regular debt collection methods like wage garnishment, tax refunds, and Social Security benefits can also be withheld to collect the past dues.

    The HEROES Act proposes that this temporary forbearance should be extended by another year until the final expiration on September 30th, 2021. It states that all borrowers must be given an additional 30-day grace period during which late payment charges and negative reports shouldn’t be marked on the borrower’s credit record.

    0% Interest 

    The current Act states that borrowers don’t have to make additional payments on student loans as no interest will accrue on the pending balances until September 30th, 2020. This implies that irrespective of the rate mentioned in your eligible federal loan agreement, the rate during this period is 0%.

    As per the proposed HEROES Act, this 0% interest period should be extended until September 30th, 2021, or until the economy shows preliminary signs of recovery. For Perkins and FFEL loans, the concerned departments must pay the interest on the outstanding principal. Additionally, the Act proposes that any accrued interest on these loans before March 13th, 2020 won’t be capitalized.

    Loan Forgiveness

    Usually, borrowers can apply for student loan forgiveness on eligible federal student loans through the public service loan forgiveness (PSLF) program or by enrolling in an Income-Driven Repayment (IDR) plan. Under the IDR-plan, a borrower must make regular payments for a period of 20 to 25 years, while the PSLF program requires 120 months of regular payments. Moreover, PSLF is only available for selected borrowers.

    The HEROES Act proposes that all private and federal student loans should be eligible for forgiveness. As per this Act, all eligible borrowers will receive $10,000 each towards forgiveness. Moreover, this forgiveness won’t be taxable. In addition, if you have a private student loan, the Act proposes that the US Treasury will pay $10,000 of the outstanding balance.

    Public Service Loan Forgiveness

    Currently, PSLF eligibility has strict criteria. Borrowers will be eligible to seek forgiveness on the outstanding balances after making 10 years of regular repayments on their Direct Loans. Meanwhile, they must be employed full-time with a pre-approved employer such as the Peace Corps or AmeriCorps, or a not-for-profit organization. The CARES Act states that the temporary forbearance applies to borrowers who have previously opted for PSLF programs, but the approval terms for this aren't clear.

    The HEROES Act suggests multiple changes to the PSLF program. As per the proposal, even FFEL loan holders will qualify for the program. It states that FFEL loans can be consolidated into a Direct Loan and all prior payments should be applied towards the consolidation. Moreover, it’d remove the provision of being gainfully employed when applying to the program.

    Bottom Line

    As of now, discussions are still ongoing. It’s just a proposal requiring bipartisan support to become law. While some suggestions might be drafted into the ongoing CARES Act, this bill will face significant hurdles in the Senate. The Act itself features 1800 pages of policy, which has received significant backlash from Congressional Republicans who have labeled the initiative as an unaffordable liberal wish list. Stay tuned for more updates on this proposal.