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Extending the CARES Act: Push Congress to extend student loan deferment during COVID-19

Student Loan Debt

There’s no dancing around it: debt and loans are an anchor on law students and young lawyers.

To put a visual to the daunting numbers that we all know in checking our own loan servicing accounts, one place we can look is the ABA’s 2020 Profile of the Legal Profession. A survey by the ABA’s Young Lawyers Division showed that more than half of the survey respondents—56%—said they had postponed the decision to buy a house or opted to forgo purchasing a home altogether because of student debt. Nearly half of respondent—48%—said they had postponed having kids, or decided not to have kids at all. Almost 1 in 3 respondents—29%—said they had either decided to postpone getting married or not get married because of debt.

That was before the COVID pandemic hit. On July 16, 2020, the National Association for Law Placement reported that 49% of the law schools surveyed reported rescinded employment offers. About ½ of offices that hired 2020 law graduates have not yet established start dates for the new associates. Among offices that did have start dates, almost 2/3 have re-scheduled them to January 2021. And, because they often don’t have the deep book of experience or clients, new or young attorneys are most susceptible to furloughs or layoffs and often lack the experience and capital to start a successful solo practice during a recession.

That’s all well and scary enough. We also are all well aware of the #barpocalypse issues, from Michigan’s online bar exam being hit with a denial of service attack to Florida’s bar exam, which was cancelled about 60 hours before the test was to begin.

We know and understand that the challenges are daunting for anyone entering the profession. This is all the backdrop for why the ABA’s Young Lawyers Division and the Virgin Islands Bar Association recently pushed a new ABA policy supporting administrative student loan forbearance during the pandemic (Resolution 10D at the recent #ABAAnnual meeting).

What is loan forbearance, and why should I care, you may be asking. Let’s break it down. (Note: this information is mostly about Federally-held, public loans; if you have private loans, which are arguable an even bigger problem to tackle, this information may or may not apply).

For many federally-held loans, you will be placed on an automatic deferment while in school and for six months after graduating, leaving school, or dropping below half-time enrollment. For the vast majority of May graduates in any given year, that means repayment ticks on in November, even though you’ve been accruing interest in the interim while not having to make payments.

During the pandemic, though, the situation has changed. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, was signed into law. It included a section suspending all payments due on federally held student loans for six months, through September 30, 2020, and interest charges do not accumulate in the interim.

There were some great pieces about this legislation. First, it was automatic— federal student loan servicers were to take action immediately, rather than putting the burden on the borrower to affirmatively go and request a forbearance or deferment. Even better for many lawyers in government or nonprofit service, borrowers aiming toward loan forgiveness — either by working in jobs that qualify for Public Service Loan Forgiveness (PSLF) or via income-driven repayment plans that reward 20 to 25 years of payments — are credited with six monthly payments during the suspended payment period.

What amazing news—and honestly, given the speed of Congress, that action way back in March was a huge weight of shoulders.

However, we know that the pandemic is still raging in August, with little end in sight and with little change of economic rebound in the next few months. An extension of this automatic student loan forbearance would be a modest and achievable goal for lawmakers, but also would still be a huge relief for 2020 grads waiting on the bar exam or on employment and for young lawyers.

With that in mind, the Young Lawyers Division and Virgin Islands Bar Association took action to make ABA policy. As noted in our recent blog post on the bar exam resolution, due to the procedural rules that govern the submission of resolutions to the ABA House of Delegates, it was necessary for a state or territorial bar association to serve as the principal sponsor of the measure in order to ensure that it would be placed on the agenda for the August 3-4, 2020 House meeting.  During the drafting process for 10D, the Virgin Islands Bar Association and the Law Student Division worked closely with the ABA Young Lawyers Division to craft the resolution.

What the resolution calls for is a 1-year extension of automatic, administrative student loan forbearance from the CARES Act, through September of 2021. That policy goal is included in the HEROES Act, the House of Representatives-approved legislation that has yet to be debated in the Senate. However, given the weeks of delays on passing a new stimulus bill, we don’t know  if the HEROES Act will be considered as is or if there will be new legislation.

The policy was adopted by the ABA’s House of Delegates on August 4, 2020. Just because it’s now ABA policy, though, doesn’t mean it’ll be law.

We need your help to amplify the ABA’s voice and policy. Using the ABA’s grassroots tools, you can write to your members of Congress and post a message on your social media, calling for an extension of forbearance. It only takes 30 seconds to make your voice heard on this important issue.

I’m sure you’re now thinking, “wait! I thought the President issued an executive order extending student loan forbearance already, didn’t he?”

Not exactly.

On August 8, 2020, the President did issue an Executive Order about student loans. However, this extension, done without Congressional input or consent, is limited in scope. It only goes through December 2020, so only 3 additional months. It also requires a borrower to affirmatively ask their lender for a hardship forbearance through December 2020. Those 3 months also don’t count toward Public Service Loan Forgiveness like the CARES Act’s 6 months did.

So, while a stimulus package including student loan relief is stalled, with the Senate still in recess, and no progress on the third COVID relief package, we need to keep up the pressure on Congress to address student loans- at least in this limited, measured way.

Please take 30 seconds write to your legislators using the ABA’s grassroots tools.

Anthony Ciolli and Christopher Jennison Anthony Ciolli is a past President of the Virgin Islands Bar Association. He currently serves as Special Assistant to the Chief Justice of the Virgin Islands. He remains active in both the Virgin Islands Bar Association as well as the American Bar Association, where he serves as one of the Virgin Islands delegates to the ABA House of Delegates. He also serves on the Executive Council of the National Conference of Bar Presidents. Christopher Jennison is a member of the Maryland and the D.C. bars. He practices employment and labor defense for the Federal Aviation Administration, in Washington, D.C. He is active in the Maryland State and American Bar Associations (ABA), currently serving as the ABA Young Lawyers Division Speaker, as an MSBA Delegate in the ABA House of Delegates, and as a Young Lawyer member of the MSBA's Board of Governors.