During times of economic distress, such as recessions or national crises, one of the groups that can be hit the hardest are students—both in terms of their education and their financial well-being. Recognizing this, stimulus bills have often included provisions aimed at easing the burden on students, supporting their educational journeys, and providing relief for student loan borrowers.
In this article, we will explore how various stimulus bills have addressed educational needs, including financial aid, student loan relief, and other measures to support students during times of economic upheaval.
One of the most impactful aspects of stimulus packages in recent years has been the relief provided to federal student loan borrowers. As the COVID-19 pandemic disrupted everyday life and economic stability, Congress recognized the financial strain on students and borrowers and included provisions to ease student loan repayment.
Student Loan Payment Suspension
Under the CARES Act, passed in March 2020, the federal government suspended payments on federally held student loans. The key provisions included:
Suspension of Payments: Payments on federal student loans were paused until September 2020, with no interest accruing during this time.
Automatic Suspension: The suspension applied automatically, so borrowers did not need to apply to benefit from this relief.
Forbearance: The suspension of payments was effectively a form of forbearance, meaning that borrowers would not face penalties for non-payment during the suspension period.
These measures were extended multiple times, and while payments have resumed, many borrowers continued to benefit from this relief, especially those who were struggling financially due to the pandemic.
Zero Percent Interest
Along with the suspension of payments, the interest rate on federal student loans was reduced to 0%, making it the ideal time for borrowers to focus on other financial priorities without worrying about increasing loan balances. This helped many students and recent graduates who were struggling to find employment or working reduced hours during the pandemic.
Public Service Loan Forgiveness (PSLF) Flexibility
For borrowers seeking forgiveness through the Public Service Loan Forgiveness (PSLF) program, the CARES Act also made provisions to ensure that months spent in forbearance still counted toward loan forgiveness. This was a key benefit for many students and graduates who were working in government or nonprofit jobs and were planning to have their loans forgiven after meeting the program’s requirements.
Stimulus bills have provided direct funding to students through grants and financial aid programs. These funds are often used for tuition, fees, and other educational expenses, helping to alleviate financial burdens and keep students in school.
Higher Education Emergency Relief Fund (HEERF)
Under the CARES Act, a substantial portion of the funds allocated to education went into the Higher Education Emergency Relief Fund (HEERF). This fund provided colleges and universities with money to distribute directly to students.
Eligible Uses: The funds could be used by students for expenses related to the disruption of their education, such as tuition, food, housing, healthcare, and childcare.
Institutional Support: Schools also received funds through HEERF to help them transition to online learning and support other operational needs during the pandemic.
The American Rescue Plan (ARP) of 2021 also extended and expanded this relief, providing additional funding for students and institutions as they navigated the ongoing effects of the pandemic.
The Pell Grant is a need-based federal grant program for low-income students that does not require repayment. While Pell Grants are typically awarded to undergraduate students, stimulus bills have aimed to increase the amount of funding available to students who qualify.
Increased Funding for Pell Grants
The ARP and other relief packages included provisions that expanded access to Pell Grants and temporarily increased the amount of funding for certain students:
Expansion for Students in Need: More students, including those attending community colleges or enrolling in part-time programs, were eligible for increased Pell Grants under specific provisions.
Support for Nontraditional Students: With many adult learners or nontraditional students returning to school during the pandemic, stimulus bills provided additional support to this population, ensuring that financial aid was accessible to more people seeking education during economic recovery.
These increases provided vital financial support to students and helped keep the doors of education open for individuals from low-income backgrounds, furthering the goal of expanding access to education during times of crisis.
Stimulus bills also addressed the educational needs of younger students, including K-12 education, by providing funding to schools and school districts to support remote learning, implement health and safety measures, and address other disruptions caused by the pandemic.
Elementary and Secondary School Emergency Relief Fund (ESSER)
The ESSER Fund, established under the CARES Act and extended under the ARP, provided substantial financial relief to K-12 schools to help them adapt to the challenges posed by COVID-19.
Remote Learning Resources: ESSER funds allowed school districts to purchase technology, such as laptops and internet access, to facilitate remote learning for students across the country.
Health and Safety Measures: The funding also helped schools implement necessary health and safety measures to prevent the spread of the virus, including PPE for teachers and students, sanitation supplies, and facility upgrades to ensure safe in-person learning.
This support helped K-12 schools adapt to a rapidly changing educational environment and continue providing education to students despite challenges related to health, safety, and remote learning needs.
Stimulus bills also included provisions aimed at providing tax relief for families and students paying for educational expenses.
Tax-Free Student Loan Forgiveness
Under the American Rescue Plan and subsequent legislation, any student loan forgiveness received in 2021 and beyond is tax-free. This provision allows borrowers to have their loans forgiven without having to worry about being taxed on the forgiven amount. This tax-free forgiveness applies to both federal student loan programs like Income-Driven Repayment (IDR) and forgiveness programs like Public Service Loan Forgiveness (PSLF).
Tuition and Fees Deduction
In addition to student loan relief, some stimulus bills provided temporary tax deductions for families paying for tuition and other educational expenses. These deductions helped make education more affordable by providing financial relief in the form of tax breaks for families with qualifying educational expenses.
While stimulus bills have provided crucial relief to students, challenges still remain, particularly regarding the long-term affordability of higher education, access to resources for remote learning, and the continued burden of student loan debt.
Rising Education Costs: The cost of higher education continues to increase, and many students face financial struggles in the form of tuition fees, textbooks, and living expenses.
Student Loan Debt: The student loan debt crisis remains a significant issue for millions of Americans, with outstanding loan balances reaching over $1.7 trillion. While stimulus measures have helped temporarily, long-term solutions are necessary to reduce student debt burdens.
Stimulus bills have provided significant relief to students through various measures, including student loan forgiveness, expanded financial aid, grants, and support for both K-12 and higher education institutions. These provisions have helped ease the financial burden on students and their families, ensuring that education continues to be accessible during times of crisis.
As we move forward, it is important for policymakers to continue to address the needs of students and create long-term solutions to support affordable education and the reduction of student loan debt. The benefits provided by stimulus bills have been crucial, but further action is needed to ensure that all students have the resources they need to succeed, regardless of economic challenges.
For more information on how stimulus bills impact education and resources for students, explore our website for expert insights and updates on the latest relief measures.
