In Bankruptcy Information

The House has proposed a new $2.2 trillion Covid relief/stimulus package that includes more student loan relief. If you have a student loan, you might be affected. Here are some highlights of the proposal along with a caveat about not getting too excited just yet.

Student Loan Deferrals
Payments on federal student loans have been deferred since March. The proposal would extend the deferral through September 30, 2021, making a total of 18 months. In addition, no interest would accrue. That amounts to a zero percent interest rate for those 18 months. And, no collection action would start or continue during that time, either. Unlike the CARES Act passed in March, this proposal includes all federal student loans. The CARES Act did not include Perkins loans and FFELP loans. This is because these loans are not owned by the government. Perkins loans are owned by colleges and universities and FFELP loans are owned by private investors. Under the House proposal, people owing Perkins and FFELP loans would get the same relief as those owing federal student loans.

Loan Forgiveness
The proposal contains a provision for forgiveness of student loan debt. However, forgiveness is only for “economically distressed” borrowers and then only up to $10,000. Don’t expect wholesale debt forgiveness.

Not All Student Loans Affected
As I said, don’t get too excited yet. This only applies to federal student loans. Private loans would not be affected. If you have a private student loan, this proposal won’t offer any relief.

When Will This Happen?
That’s the big question. It’s only a proposal in the House right now. If the House passes it, the bill goes to the Senate, where it will probably be voted down. Republicans and Democrats have differing views on the amount of relief to include in a second stimulus package. The House proposal is $2.2 trillion, down from the $3 trillion proposed in May. However, it’s still above the $1.5 trillion the Senate has proposed, so the two are $700 billion apart. Negotiations are underway but it’s unlikely that anything will be finalized before the election.

Other Relief
Included in the proposal is another round of $1,200 per person stimulus checks and an extension of $600/week unemployment benefits. These two benefits make up the bulk of the $2.2 trillion package, and it’s these proposals that are the main cause of dispute between the House and Senate.

Bankruptcy Won’t Help
Remember that in most cases, bankruptcy will not give relief from student loans. There are long-term proposals in both the House and the Senate to address the student loan crisis in the United States, but this stimulus proposal does not deal with the dischargeability of student loans in bankruptcy. If you need bankruptcy help, contact us here, or call or text (801) 413-3708, or email

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