Can I use the stimulus check to pay off Defaulted Student Loans?
As the Senate prepares the stimulus relief package amid the coronavirus pandemic, several proposals are circulating that include student loan forgiveness.
Congress got back to work on 20 July and since then there are talks that the second stimulus relief package is being drafted, but it will be the fourth and last one amid the coronavirus pandemic. In this new bill there is no mention of student loan forgiveness or extending the student loan relief from the CARES Act.
There is a proposal from Senator Lamar Alexander that a new student loan repayment plan in which student loan borrowers with no income would make no student loan payments. Alexander also proposed that monthly student loan payments would be based on 10% of discretionary income once a borrower earns income again.
Alexander’s proposal is almost the same as the Pay As you Earn (PAYE) and Revised Pay As You Earn (REPAYE) repayment plans, which already exempt borrowers earning less than 150% of the poverty limit from any payment obligation, and cap other borrowers’ student loan payments at 10% of their discretionary income.
Democrats stand on student loans
The House Democrats wrote and approved the HEROES Act in May that included student loan aid amid the coronavirus pandemic. Under this bill they paused all payments for federal student loans, set interest rates at 0%, so interest will not accrue. Democrats included a $10,000 of student loan forgiveness for borrowers who are “struggling financially,”
When the Senate approves and signs a new stimulus relief package and no student loan forgiveness or extension is included it will force millions of borrowers to re-enter repayment as early as this fall during the coronavirus economic crises.
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