Student Loan Reliefs Extended to Borrowers by the New Pandemic Stimulus Package

The controversial 2021 Omnibus Appropriations Bill that Trump grudgingly enacted, includes provisions to help students cope in managing their student loans. Although the provisions do not include financial aid, they will make student loans more accessible and available to low-income students or their families.

While the provisions of the earlier CARES Act that allowed students to defer payments on principal and interests on existing student loans was set to expire on December 31, incumbent Education Secretary Devos took the initiative of extending the moratorium up to January 31, 2021. Any need to further extend the moratorium by February 2021 will be decided by incoming President-elect Joe Biden after he officially assumes office on January 20, 2021.

New Relief Extended to Students with Existing Educational Loans

The new pandemic relief package related to the financial aid  accessed via the government’s Pell Grants include the following:

Repeal of SULA

The SULA, or Subsidized Loan Act, which prescribes a set of guidelines limiting the amount of subsidized loans that students can avail to cover up costs only up to 150% of the total duration of their education program, While the SULA affected mostly students who shifted from a 4-year college degree to a 2-year course, the new bill’s repeal of the SULA now enables students to access subsidized loans needed until completion of their college course.

The term subsidized denotes that the government assumes the responsibility of paying the interest on loans availed by students as funding for their college education.

Changes in the Student Loan Repayment Assistance Program

In the CARES ACT, a Loan Repayment Assistance Program (LRAP) exempted students from the payment of taxes on educational benefits provided by employer. The tax exemption is likewise set to expire on December 31, 2021 but has been extended to stay in effect for a period of five years; starting January 2021 through the end of 2025.

In cases where student loans were paid by employers as part of employment incentivisation and retention program, the amount paid by employers were still taxable on the part of students. Whereas before and under the IRS Code, the student loan payments made in behalf of employees were considered as part of the salaries received  from employers.

Changes Introduced on How the U.S. Government Will Process and Service Next Generation Student Loans

The Next Generation Processing and Servicing (NextGen) of federal student loans has been extended and revised

The U.S. government will now distribute servicing of student loans to servicers on the basis of the latter’s capacity and performance.

Borrowers whose student loan accounts are being handled by servicers who have recurrently violated FSA guidelines, laws and applicable requirements, will be relocated to compliant loan servicers.

NextGen loans will now allow multi-student loan servicers to enter direct contract agreements with the U.S. Department of Education.

NextGen loans must provide incentivization aimed at supporting borrowers who are at risk of becoming delinquent or of defaulting on payment.

Borrowers of loans to fund student education are now allowed to choose the loan servicer who will consolidate their federal student loans.

Additionally, the new student loan relief includes providing emergency financial assistance to students who are incarcerated. The change entails modification in the FAFSA form as a way to repeal the exclusion of incarcerated or imprisoned students looking to complete their college education.

In line with all the changes introduced above, the U.S. Department of Education is required expand the publication of comprehensive data regarding the performance of loan servicers as a way to improve the transparency of the servicers and the terms and conditions covering the lending agreements.

Such changes will definitely make it easier for students who have previously defaulted or have been delinquent in their student loans, to access a same day funding personal loan that they can use to have their past due student loans restructured at the soonest time possible.

Coronavirus Forbearance of Student Loans

The U.S. Dept. of Education recently published information about student loan forbearance in response to the impact of the ongoing coronavirus crisis.

The Coronavirus and Forbearance is in connection with the Congress-approved CARES Act, signed into law by president Donald Trump last March 27, 2020 The law includes broad relief for borrowers who have been granted federal student loans. The CARES Act has automatically placed student borrowings under administrative forbearance, which means students and/or parents are allowed to temporarily stop making monthly payments on educational loans, up to September 30, 2020.


Although the CARES Act was enacted March 27, 2020, the date of effectivity for the suspension of payments was made retroactive from March 13, 2020.

Other Questions Raised in Connection with Student Loans and Financial Aid

Some students have put forward questions about the possibility of increasing the financial aid received, after their parents lost their jobs as a result of the coronavirus crisis.

In response to such queries, the U.S. Education Department recommends communicating with the financial aid office of the school. The department gives assurance that there are flexibility measures in place to enable students to stay in school and finish their course.

Generally, the recommendation is for students and/or parents to get in touch with schools via their website and inquire about the coronavirus-related guidance outlined for students, particularly with regard to student financial loans granted by private financial institutions.Under the forbearance scheme, students who will continue payment of their loans amid the health crisis, will not pay interest due on the loan.

The Education Department stated that although most schools transitioned to conducting classes through online systems, many continue to stay open in order to provide students not only answers to their questions but also assistance.