Sunday, May 24, 2020

HEROES bill dishes out thin gruel for student-loan debtors: "Please, sir, I want some more."

In its original form, the HEROES bill was 1,800 pages long; and I am grateful to Steve Rhode of Get Out of Debt Guy for summarizing its essential elements.  The original legislation provided up to $10,000 in student-loan relief for borrowers holding federal or private loans.

By the time the House of Representatives approved the HEROES Act in mid-May, relief for student debtors was watered down considerably. As Mark Kantrowitz reported, the bill that was approved by the House limits relief to "economically distressed borrowers."

Who are the economically distressed borrowers? Mostly these benefits will go to people who are:

  • in default on their loans or whose monthly payments are more than 90 days overdue,
  • People with economic hardship deferments, cancer treatment deferments, or unemployment deferments,
  • People whose loans are in forbearance and whose debt burden exceeds 20 percent of the borrower's income.

The HEROES Act was thin gruel when it was first introduced, but the gruel got even thinner by the time the House of Representatives passed it by a vote of 208 to 199.

Forty-five million Americans are burdened with federal student loans totaling $1.6 trillion, and private-loan borrowers owe about 125 billion. That's a lot of debt, and the HEROES Act offers only a few crumbs of relief.

Assuming the Senate approves the HEROES Act in its present form (which is not likely), most of this money will do nothing more than pay down the interest on borrowers' student-loan balances. People in income-driven repayment plans are seeing their debt grow larger with each passing month due to accruing interest. People whose student loans are in deferment or forbearance are not making their monthly loan payments, but interest is accruing on their loan balances as well.

In short, the HEROES Act is an insult to the millions of people who are being dragged down by unmanageable student loans. Like Oliver Twist, all 45 million student-loan borrowers should shout, "Please, sir, I want some more."


Please, sir, I want some more.

2 comments:

  1. My fiancee is a medical professional, and she's informed me that student debt has become a Massive problem amongst recent attendees of medical schools. Thus, as an economist, I offer that this debt is putting a severe crimp in the supply of would-be physicians of many kinds. Just one more way by which the concept of "student loans" is causing our society to regress.

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  2. You are right. Medical school graduates begin their careers with crushing debt, which affects their career paths. Law school graduates are starting their careers with student debt they will never pay back. There have been news reports about vet school graduates who borrowed too much given the average salaries of veterinarians. Meanwhile a growing number of our medical doctors are foreign. They start their careers in the U.S. with no debt. Thanks for writing.

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