The Heroes Act (The Health and Economic Recovery Omnibus Emergency Solution Act) was introduced by Democratic members of the U.S. House of Representatives on May 12, 2020. The Heroes Act includes a proposal for student loan forgiveness among other student aid provisions.
To get a student loan forgiveness Heroes Act, there are a bunch of requirements you should meet. Well, if you really want to get this loan forgiveness, you surely need to know what requirements you should meet so that your application is approved. Let’s find out the information about it in our post!
How to Qualify for Student Loan Forgiveness Heroes Act?
Student loan forgiveness Heroes Act will only apply for the students who have economically distressed. Well, the economically distressed here refers to a student loan borrower who will otherwise pay $0 monthly. It applies if the student loan borrower took an income-driven repayment plan and also was in student loan default or also was 90 days delinquent on their student loans.
In other words, it means that the student loan borrowers will not get any student loan forgiveness. In short, that is a much smaller subsection of the 45 million student loan borrowers who hope for student loan forgiveness.
There may be a situation when Congress will ultimately decide to cancel the student loans, the opponents of wide-scale student loan forgiveness will be more willing to support this limited student loan forgiveness.
What Rules Are the Heroes Act?
The Heroes Act is also known as a stimulus package that means a win for borrowers looking for student loan repayment from their employers. Under IRC Section 127 for five years, the Heroes ACT actually extends student loan assistance where the employers can now pay employees up to $5,250 per year toward qualified educational expenses.
The student loan forgiveness Heroes ACT should be for a qualified education loan issued for the education of the employee. For example, the payments cannot be for the education of an employee’s spouse or children.
The provisions of student loan forgiveness Heroes Act remain in full force where an employer has to adopt and implement a written plan to describe the tuition assistance benefit. The employer should also communicate the terms of the program to eligible employees.
For more information, no more than 5% of the amounts that are paid can go to shareholders and owners who have over 5% of the company’s capital or stock. The employers that currently offer the student loan assistance with post-tax dollars or do not offer the assistance at all probably want to consider taking advantage of this temporary extension. Why? That’s because it actually provides a precious, tax-advantageous benefit which will assist attract, retain and incentivize a modern workforce.
Furthermore, the Heroes Act actually covers various plans to stimulate the economy, including:
- Second stimulus checks
- Weekly enhanced unemployment benefits
- State and local aid
- Student loan forgiveness.
According to President-elect Joe Biden, Congress has to pass a stimulus package like the Heroes Act. But, the only one issue for people who want to cancel student loans is that The Heroes Act will not cancel student loans for every student loan borrower.
Of course, it may surprise you, considering all the rhetoric to cancel student loans, especially in a legislative bill which has been proposed and passed by the House Democrats.
Will the Heroes Act Cancel Your Student Loan Forgiveness?
The Heroes Act will likely cancel your student loan forgiveness, if Congress passes the Heroes Act in its original form. In this case, the Heroes Act will only cancel private student loans, up to $10,000 for each student loan borrower.
Additionally, federal student loans will comprise over 90% of the $1.6 trillion of outstanding student loan debt. Only private student loans will be cancelled, while the borrowers are holding both private student loans and federal students loans.
When you have Direct Loans including any Perkins Loans or FFELP or also Stafford, the student loans will not be eligible for student loan forgiveness. So, that’s why the Heroes Act will be different from a lot of other proposals in Congress that will cancel federal student loans.
The Heroes Act will actually cancel up to $10,000 in federal loans per borrower. For the loans with the highest interest rates, the U.S. Department of Education will apply the loan forgiveness first, if the borrowers do not specify how to apply for the student loan forgiveness. Moreover, the loan forgiveness will be implemented first to the loan with the highest principal balance, if all of the borrower’s loans have the same interest rate.
For private student loans, the U.S. Treasury will give up to $10,000 per borrower or the outstanding loan balance within 90 days after September 30, 2021. However, the private student loan payments will reduce this student loan forgiveness, previously made by the U.S. Treasury.
Additionally, the private student loan borrowers will not be required to apply the loan forgiveness to all of their private student loans. However, they will be able to select to have the payments that are made directly to a specific loan. Unfortunately, the loan forgiveness will be implemented to the loans with the highest interest rates first, if the borrower does not create such an election.
What Does the Heroes Act Give to Students?
It is known that the Heroes Act excludes all emergency financial aid grants to the student from need analysis that includes emergency financial aid grants that have been funded by the CARES Act, states, federal agencies, Indian tribes, scholar-ship granting organizations and also Institutions of higher education.
Aside from other restrictions based on the student’s enrollment at a university or college, the Heroes Act actually bans the U.S. Department of Education from imposing any restrictions where the students probably receive emergency financial aid grants.
However, this amendment will make undocumented students, international students and also DACA student eligible for emergency financial aid grant funds. This also reverses the guidance from the U.S. Department of Education which required emergency financial aid grant recipients to be eligible to file a FAFSA or have filed a Free Application for Federal Student Aid (FAFSA).