Debt Relief Bill

Published October 10, 2023

In response to the economic impact of the COVID-19 pandemic, Congress has passed a series of relief packages aimed at providing financial assistance to individuals and businesses struggling with debt. The latest bill, the American Rescue Plan Act of 2021, is a $1.9 trillion stimulus package that includes provisions for debt relief. In this blog post, we will break down the latest debt relief bill and explain everything you need to know. What is the American Rescue Plan Act of 2021? The American Rescue Plan Act was signed into law by President Biden on March 11, 2021. It is the third major stimulus package aimed at providing relief to individuals and businesses impacted by the pandemic. The bill includes a variety of provisions, including direct payments to individuals, unemployment insurance extensions, and assistance for small businesses. Additionally, it includes several measures for debt relief, which we will explore in more detail below. Who is Eligible for Debt Relief Under This Bill? The American Rescue Plan Act includes several provisions for individuals and businesses struggling with debt. Here is a breakdown of who may be eligible for debt relief under this bill: Individuals: - Those who have incurred eligible student loan debt (both federal and private) - Those in a Chapter 13 bankruptcy repayment plan - Those in default on their federal student loans - Those who have accrued debt for essential household expenses, such as rent, mortgage, and utilities Small Businesses: - Those that have taken out Paycheck Protection Program (PPP) loans - Those that have taken out Economic Injury Disaster Loans (EIDL) - Those with eligible Small Business Administration (SBA) debt How Will This Bill Provide Debt Relief? The American Rescue Plan Act includes several measures to provide debt relief. Here are the details of each provision: 1. Expanded and Tax-Free Student Loan Forgiveness: Under this bill, the federal government will pay off any outstanding balance on eligible student loans for borrowers who have reached the end of their repayment period (usually 20-25 years). This forgiveness will cover both the principal and interest of the loan, and the amount forgiven will be tax-free. 2. Extended Federal Student Loan Forbearance: The bill also extends the federal student loan forbearance period until September 30, 2021. This means that borrowers will not be required to make payments on their federal student loans during this time, and no interest will accrue. 3. Funding for States to Offer Additional Relief: The bill includes $10 billion in funding for state governments to provide additional debt relief for residents, primarily through mortgage, rent, and utility assistance. 4. Extension of Pandemic Unemployment Assistance (PUA): The bill extends the PUA program, which provides unemployment benefits to self-employed individuals, gig workers, and others who are not typically eligible for traditional unemployment insurance. 5. Extension of Small Business Relief Programs: The bill extends several small business relief programs, such as the PPP and EIDL, to help business owners struggling with debt. What are the Benefits of This Bill? The American Rescue Plan Act aims to provide much-needed relief to individuals and businesses struggling with debt. Here are some of the main benefits of this bill: - Student loan forgiveness: This bill provides tax-free student loan forgiveness for borrowers who have reached the end of their repayment period, offering a significant burden for those with large student loan debt. - Extended forbearance: The extension of the federal student loan forbearance period until September 30, 2021, gives borrowers some relief and more time to get their finances in order. - Access to additional relief: The funding provided to states to offer additional debt relief will help individuals who are struggling to pay essential household expenses. - Extended unemployment assistance: The extension of PUA and other unemployment benefits will provide a financial lifeline for those who have lost their jobs or have faced reduced work hours due to the pandemic. - Extended small business relief: The extension of small business relief programs can help businesses stay afloat and continue to operate, reducing the risk of bankruptcy and debt accumulation. What Should You Do if You Need Debt Relief? If you are struggling with debt, there are several steps you can take to seek relief under the American Rescue Plan Act: 1. Contact your student loan servicer: If you have federal student loans, contact your loan servicer to request an extension of forbearance or inquire about any potential student loan forgiveness options under the bill. 2. Contact your state government: If you need assistance with essential household expenses, reach out to your state government to inquire about the programs they will be offering with the funds provided under the bill. 3. Consult with a bankruptcy attorney: If you are considering filing for bankruptcy, consult with a bankruptcy attorney to see how the extension of Chapter 13 repayment plans may benefit you. 4. Explore small business relief options: If you are a small business owner struggling with debt, consult with the SBA or your lender to see if you are eligible for extensions or assistance under the bill. Bottom Line The American Rescue Plan Act of 2021 provides much-needed relief for individuals and businesses struggling with debt. Whether you have student loans, are in a Chapter 13 repayment plan, or have incurred debt for essential expenses, there may be options for assistance under this bill. We recommend staying informed about the provisions of the bill and reaching out for help if you need it.

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