Everything You Need to Know About the Heroes Act and Student Loans

If you want to learn a little more about the heroes act and how it can affect your student loans, keep reading.

Main image courtesy of AAMC.

When the COVID-19 pandemic hit the world in 2020, it took everyone by surprise. The U.S. had to close down and enforce shelter in place rules throughout the country in order to help protect people from this novel virus. Many industries were affected as a result of shut downs and slow downs, but there were some industries that had to keep going. 

Our healthcare workers, first responders, and other essential personnel did not have the choice to stay home, and they had to keep things going as best they could. As the fall out from the pandemic went into months and now years, we are still dealing with the repercussions from that time. Many people lost jobs, the supply chains stalled, and businesses lost revenue due to a decrease in sales. 

Our government realized something needed to be done to help out the American people as we continue to recover in the aftermath of the pandemic. That’s where the Heroes Act comes into play. You may have heard of this bill, but are unsure what it is, and who is covered under it. Not to worry, because in this post we’re going to cover:

  • What the Heroes Act is
  • Who is covered under the Heroes Act
  • What the Heroes Act means for student loans 

What is the Heroes Act?

Let’s discuss a little more about what the Heroes Act is, and why it’s so important

man and woman talking in masks

The Heroes Act has helped save both American  individuals and companies. Image courtesy of Temple University.

The Heroes Act (Health and Economic Recovery Omnibus Emergency Solutions Act) was designed by Congress to help those struggling due to the coronavirus pandemic. While everyone’s way of life was changed when the pandemic first broke out, there were some sectors of the economy and industries that were affected more than others. 

Because many people lost their jobs due to infection or closures, something had to be done to help keep Americans afloat while scientists worked on a vaccine for the virus. The Heroes Bill was designed to help Americans and protect their lives, livelihoods, and democracy while adjustments were made to our “new normal.”

This bill provided funding to help:

  • Support small businesses. Small businesses were hit incredibly hard with the pandemic closures and disruption of the supply chain. When people could no longer go out, restaurants, airlines, and event venues were hit especially hard. This act helped small businesses get loans to try and help them to stay afloat. 

  • Assist with childcare. When schools and many childcare centers closed, parents were left with lots of tough decisions. The Heroes Act helped bring money into struggling schools and provided parents with some much-needed childcare support.

  • Helps state and local governments. Many communities were struggling to find the funds to pay for first responders such as firefighters, EMTs, and police. Because these are important and essential positions, the Heroes Act was able to allocate funds to local, city, and state governments to keep these workers from losing their jobs.

  • Provides direct payments. Many Americans qualified for the stimulus checks, which were aimed to help alleviate some of the financial difficulty faced by people all over the country. Whether they lost their jobs or had their hours reduced, many people lost out on their income because of the pandemic.

  • Keeps healthcare coverage. This act ensured that uninsured Americans were protected as well as many others from losing their healthcare coverage. If they lost their job due to the pandemic, they could still count on healthcare coverage in case of sickness.

  • Protects unemployment. Unemployment payments continued to arrive weekly, ensuring that many Americans were able to put food on the table and pay their bills while they looked for a job. These payments were even extended, preventing people from exhausting their eligibility. 

  • Provides housing assistance. When you lose a job, you have a hard time paying rent or your mortgage. The Heroes Act ensured that people could not be evicted by providing assistance for renters and homeowners to make their payments on time. This prevented a lot of Americans from becoming homeless.

This list is not conclusive, as many businesses, agencies, and organizations were assisted with the provisions laid out in the Heroes Act

How Do You Know If You're Covered Under the Student Loan Section of Heroes Act?

Does the Heroes Act apply to your student loan situation? How do you know?

crowd of people wearing masks

The Heroes Act for student loans means you could get some much-needed assistance with payments. Image courtesy of Salon.

If you have federal student loans, then the Heroes Act does apply to your situation. You are not required to make payments on your federal loans until the time period designated by Congress has expired. However, if you’re able to make payments, this might be a very good time to continue them. With no interest accruing on your loans, you have a unique opportunity to start to pay down the principal of your loan balance. This pause has been extended through May 1, 2022, by the Biden Administration.

In addition to pausing payments and interest, did you know that the Heroes Act also extended the ability of some employers to make tax-free payments up to $5,250 towards both federal and private student loans? Before both the Cares Act and the Heroes Act, this money from employers was limited to helping employees with items necessary for their education, such as tuition or books. After the passage of the Heroes Act, under the IRC (Internal Revenue Code) these employers are now allowed to make tax-free payments that can go towards loans. Until December 31, 2025, employers can now give employees up to $5,250 per year to put towards whatever educational expense the employee needs—whether that’s tuition or repayment of a previous student loan. Employers that use this program have an advantage over other companies since student loan debt is one of the biggest obstacles faced by people of working age. 

An incentive such as assistance with student loan repayment, tax-free, is a great way to attract the necessary talent in a variety of sectors. Plus, for employees, having some assistance each year to help chip away at their debt is very much appreciated. 

How Does the Heroes Act Affect Student Loans and Other FAQs

Some frequently asked questions regarding the Heroes Act and student loans

teacher in a classroom

Even if your payments are paused, it’s not a bad idea to continue to make payments. Image courtesy of Indiana University.

In addition to helping many industries get back on their feet, allowing Americans to get back to work, and giving much needed financial relief to local governments, the Heroes Act has helped out student loan borrowers. If you have federal loans, the required payments are on pause until May 1, 2022, and your interest may be paused as well. So what does this mean for the future of your student loans, and is there anything else that should you be aware of?

Are you allowed to make payments on your federal loans?

If you’re able to, yes you are allowed to continue making payments on your federal loans. If your financial situation allows for it, you can make your full payments just like you did before the pandemic and the government’s payment pause, or you can make partial payments. Either way, you’re continuing to pay down your student loan debt, which is always a good thing.

As we mentioned earlier, with zero interest and no payments required until May 1, 2022, this might be one of the best times to make a dent in your debt amount. Once all of the interest that has accumulated on your loan is paid, any additional payments you make monthly will be applied to your principal balance.

Can you continue with auto payments?

For federal loans, the auto payment function was suspended when the pause in payments for student loans was approved. You can still continue to make auto payments if your financial situation allows it. You’ll just need to contact your loan servicer and let them know you’d like to resume your auto debit function. Remember, you can always log into your account and make manual payments each month. 

Will the interest be capitalized on your loans at the end of the program?

For most borrowers with student loans, at the end of the payment pause, your interest will not capitalize. Capitalized interest is an additional amount that gets put onto the principal balance after your grace period, deferment, or forbearance. For most people, this additional interest amount will not be added onto their loans after the payment pause ends.

We hope you now know a little more about the Heroes Act and how it affects student loans. If you’re able to make payments, continue to do so, but if not, just be aware that the program is slated to end on May 1, 2022, unless there is another extension. 

Bridget Houlihan
Bridget is a writer based in Pittsburgh, PA.
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