On Wednesday, the “Coronavirus Aid, Relief, and Economic Security Act,” or “CARES Act,” passed in the Senate unanimously, 96-0, and now heads to the House of Representatives. The CARES Act is aimed at helping Americans and businesses affected by the coronavirus (“COVID-19”). While the majority of reporting has focused on the provision of the CARES Act regarding direct payments to millions of Americans, another provision in the CARES Act arguably will have an even greater impact on Americans: a six-month moratorium on the collection of student loan debt. The CARES Act does nothing else to restrict debt collectors from continuing to operate.
Beginning on page 333, the CARES Act states that all payments due for loans held by the Department of Education are suspended through September 30, 2020, and no interest will be allowed to accrue on those loans during that period. Further, for the purposes of credit reporting, all suspended payments are to be treated as if they were regularly scheduled payments. All involuntary collection efforts, including wage garnishment, reduction of income tax refund, and reduction of any other federal benefit payment, also are suspended through September 30, 2020.
The DOE will notify borrowers about the suspension within 15 days of the CARES Act being enacted, and, in August, carry out a program to notify borrowers when their payments are scheduled to resume.
The average student loan borrower pays $393 per month, according to the Federal Reserve Board, and there are more than 45 million Americans with student debt. The moratorium defers an average $2,358 in student loan payments during the COVID-19 pandemic.
The House of Representatives is expected to approve the CARES Act tomorrow, and President Trump has said that he would sign the bill as soon as he receives it.
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