Financing

Student loan repayments emerge as a divide in the coronavirus package debate

On Thursday, a key sticking point emerged between leading Democrats and Republicans over what to do for the roughly 43 million Americans who have been exempted from paying off student loans during the pandemic, even as Republican senators and l The Trump administration continued to try to work out the details of their proposal for the next coronavirus relief package.

Democrats in the House and Senate, including Senator Patty Murray, criticized a proposal by Lamar Alexander, the Senate’s senior Republican on education, who would continue to spare only those with no income from making payments.

Meanwhile, even as Republican Senate Majority Leader Mitch McConnell said details of his proposal would not be released until Monday, further divisions with Democrats over issues critical to higher education emerged. . Alexander, in an impromptu press conference, said the White House had agreed to include $ 30 billion for education, a figure Murray, from Washington state, said was not enough .

The problem with the student loan debate is that Congress’ previous coronavirus aid program, the CARES Act, exempted borrowers from making payments, without interest, until September 30.

Alexander, of Tennessee, told reporters that an agreement on the education part of the upcoming proposal, reached Wednesday night between himself, other Senate Republican leaders, Treasury Secretary Steven Mnuchin and Chief of Staff of the White House Mark Meadows, would include his proposal.

Those without income, excluding unemployment, would continue to be exempt from making payments. Those with income should not pay more than 10 percent of their discretionary income, which would allow spending on essentials such as food and shelter.

“This should be very good news for the 43 million Americans who have student loans to repay,” Alexander said.

However, advocacy groups calling for larger-scale student debt forgiveness have mentionned that borrowers already have the option of reducing their payments to a portion of their discretionary income. Those who remained employed but saw their wages drop during the economic fallout from the pandemic are expected to resume making payments under Alexander’s plan.

“We are still in the midst of an economic crisis as a result of the pandemic, and this unworkable proposal in no way replaces the extension of the break on payments,” Murray said in a statement. “This bill would make massive and complex changes to our student loan repayment plans, which would actually reduce the benefits for distressed borrowers in the midst of a pandemic and recession.”

A Democratic aide on the House education committee also criticized the idea.

“Senator Alexander’s proposal is just a worse version of the current income-based repayment plan and would effectively reduce the benefits for student borrowers who enroll,” the aide said. “As student borrowers continue to face severe financial hardship, any new program during this pandemic should aim to provide borrowers with more relief, not less. “

The aide called on Republicans to pass the Democratic proposal to extend and pass the HEROES law, which would suspend student loan payments for an additional year and reduce loan balances of economically troubled borrowers by $ 10,000, offering a student debt relief over $ 20. million federal student loan borrowers. Democrats are also proposing to completely eliminate the debt of those who have been conned by Corinthian Colleges Inc. or ITT Technical Institute, for-profit colleges who have misled potential students about the value of an education provided by both institutions.

However, Senate Republicans balked at forgiving the debt and refused to include it in the CARES package. A Republican aide to the Senate Education Committee responded to Murray and the House aide’s remarks, saying Democrats will have to compromise to get relief for borrowers under the aid.

“Instead of making unrealistic political statements about canceling student debt, Democrats should sit down to the table and work with Republicans on bipartisan solutions that actually help the American people,” the Republican aide said.

“Without bipartisan action from Congress, 43 million student loan borrowers would have to restart their monthly payments on Oct. 1 and new borrowers would be stuck with a confusing array of nine repayment options,” the aide said. “President Alexander’s bipartisan proposal is designed to achieve an outcome that will permanently solve this problem and provide immediate help to the unemployed due to the COVID-19 pandemic.”

Without specifically referring to the cancellation of student debt, McConnell of Kentucky told the Senate, “Our proposal will not waste the time of the American people with socialist fantasies that are going nowhere.

Meanwhile, as congressional negotiators prepare to strike a bipartisan deal before expanded unemployment benefits end next Friday, a debate looms over the size of the package, including how much aid colleges and states will get.

Alexander said the White House had agreed to include $ 105 billion for education in the package, including $ 30 billion for higher education, about 16 billion less than the requested $ 46.6 billion. by institutions to mitigate the financial blow they suffered during the recession. The figure does not include the $ 74 billion that the American Council on Education, a group of presidents representing colleges and universities, estimated to be the price to pay for institutions to safely reopen their campuses.

Murray said in a statement to Inside higher education that the $ 30 billion is not enough.

“Congress must provide the $ 132 billion that our colleges and universities need to survive this pandemic and to safely educate and support their students,” she said.

Also, according to a summary of the Republican proposal that was circulating on Capitol Hill, as well as the press reports, the next offer to open negotiations with the Democrats will not include more aid to states, but will give states more flexibility in using the money they have already received in the CARES bill.

Colleges and universities have asked for help in easing the hundreds of millions of cuts state legislatures are making in funding higher education. Congressman Bobby Scott, Democratic Chairman of the House Education Committee, noted in a virtual press call Tuesday that additional federal funding to colleges would not help much if it were to be matched if states applied cuts to higher education.

Referring to McConnell, the congressman from Virginia said, “If he spends $ 100 billion on education and nothing on state and local communities, they will cut over $ 100 billion from the education.

The University of California system said in a statement that the state has cut funding for the system by $ 300 million. But under a budget provision signed by the state’s Democratic Governor Gavin Newsom, the system would instead get a $ 170 million increase if California received at least $ 14 billion in federal aid by the 15th. October.

California State University spokeswoman Toni Molle said Thursday that under Newsom’s budget provision, the university would see its $ 299 million cut cut if more federal aid came. .

While a number of details of the next Republican proposal remain unknown, McConnell reiterated that it will include a provision so that it More difficult for people who contract the coronavirus to sue colleges, K-12 schools, businesses and charities. These entities would only be held liable for “gross negligence or willful misconduct”. As first reported by Inside higher education, colleges and universities were push for protection. But Murray already has mentionned she opposes the idea.

Meanwhile, a number of other Republican divergences from the Democratic proposals also appeared to await negotiations on the package.

Democrats, in their proposal for the HEROES Act package passed in May by the House, would clarify that students who are undocumented immigrants are eligible for CARES Act emergency grants to help pay for expenses like the accommodation, food and computers they needed when the lessons were taken online. He also banned Education Secretary Betsy DeVos from deciding who is eligible for aid after having ruled that undocumented students as well as others who are not eligible for federal student aid cannot obtain the scholarships.

Democrats and Republicans are also likely to disagree on whether for-profit higher education institutions should receive federal aid like they did in the CARES Act. On Thursday, 10 Democratic senators, including Elizabeth Warren of Massachusetts and Kamala Harris of California, urged congressional leaders in a letter to exclude for-profit institutions from any higher education aid in the package.

“For-profit colleges have demonstrated their ability to leverage economic concerns to generate profits,” the senators wrote. “We urge you to protect students and not provide extra money to taxpayers, especially without liability to for-profit colleges – especially when the needs of public and non-profit higher education institutions are so great. important. “

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