Student loan payments suspended for six months under Senate bill

Photo courtesy of MGN
By Katie Lobosco, CNN

    (CNN) -- Student loan borrowers would be allowed to put off paying their federal student loan payments without penalty until September 30 under the Senate coronavirus stimulus bill passed late Wednesday.

The bill provision extends the plan already put in place by the Education Department amid the coronavirus crisis, which allows borrowers to defer their payments without interest for at least 60 days. But the deferred-payment benefit currently isn't automatic and requires borrowers to contact their loan servicers to ask for help.

The Senate bill automatically suspends those payments without interest for the next six months. It also suspends the collection on defaulted debts -- including wage and tax refund garnishment.

Education Secretary Betsy DeVos said Wednesday that collections will be stopped for at least 60 days.

The Senate bill offers an additional benefit for those borrowers seeking loan forgiveness through the Public Service Loan Forgiveness program, for example. Those borrowers should still see their debt wiped away after 10 years, without being penalized for not making payments over the next six months.

But the bill stops short of a Democratic proposal to cancel a minimum of $10,000 in student debt per borrower over the course of the national emergency.

The Center for Responsible Lending is concerned that some federal student loan borrowers will be left out under the draft bill. It applies to those with federally held loans and excludes private loans, as well as some federally guaranteed loans -- likely including some disbursed prior to 2008.

Under the bill, borrowers would still be allowed to make payments during the six months.

Although the White House and Senate leaders struck a deal on the legislation early Wednesday morning, an exact time for the Senate vote has not yet been scheduled and it's not yet clear when the House will vote to approve the measure.

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