Student Loan Borrowers Get Some Coronavirus-induced Respite
Apr 22nd, 2020 @ 3:28 PM by Amber Nelson
Some 42 million Americans are getting an interest-rate breather on their student loans right now, thanks to a Trump administration action that eliminated federal loan interest charges during the COVID-19 crisis.
President Donald Trump announced the decision back on March 13 when he declared a national emergency. “To help our students and their families, I’ve waived interest on all student loans held by federal government agencies and that will be until further notice,” Trump said. “That’s a big thing for a lot of students that are left in the middle right now. Many of those schools have been closed.”
More than $1.5 trillion in outstanding federal student loans have had their interest rate lowered to zero for now.
Plus, under the CARES Act signed into law on March 27, federal student loan borrowers were granted a suspension of their payments for the next six months. All borrowers will automatically have their accounts placed in forbearance from March 13, 2020 to Sept. 30, 2020. If borrowers made any payments during this period, they can be refunded if requested.
For those seeking public service loan forgiveness, the pause in student loan payments will not disqualify them from the program. In fact, non-payment through Sept. 30 will count towards the required 120 monthly payments.
And millions of other student loan borrowers will also have their default proceedings halted “until further notice” according to a March 24 announcement from the U.S. Education Department. There are currently 9 million borrowers in default who will get a break from having their wages, tax refunds and Social Security benefits garnished. Default is defined as accounts that have not made a payment within one year. Borrowers in default will stop receiving collection calls and letters until the coronavirus situation resolves. The policy will be retroactive to March 13.
All the above listed actions only affect federal student loans, not privately held notes.
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.