- The coronavirus relief package suspends federal student loan payments through Sep. 30
- Federal student loan interest rates also drop to 0% during the same period
- The measures apply only to federal student loans and have no effect on private loans
Late last week, as college campuses across the country closed in response to the coronavirus pandemic, the U.S. Department of Education suspended payments and interest on federal student loans for 60 days. With the signing of the coronavirus relief bill by President Trump, these measures will be extended through September 30.
The bill will take effect immediately and also suspends wage garnishment and tax refund reduction for anyone who defaulted on their federal student loans. While interest rates automatically go to 0%, borrowers will have to opt in to forebearance. Credit ratings will not be affected by the suspension, and borrowers who still want to pay down the principal on their loans may continue doing so during this period.
National student loan debt hit $1.6 trillion last year. The student debt crisis, and the larger question of college affordability, has prompted proposals from both ends of the political spectrum. While Democrats have suggested sweeping reforms, up to now the Trump administration has done little to stem the growing crisis.
Unfortunately for some students, the new measures do not apply to private student loans. About 90% of student debt is federal, meaning the suspended payments will impact the monthly statements of the vast majority of student loan borrowers. But Senate Democrats, including Elizabeth Warren, urged a more profound gesture: canceling $10,000 of debt for every borrower.
While less strident than Warren’s original campaign promise to erase $50,000 per borrower, or Bernie Sanders’ plan to forgive all student loan debt, her recent proposal offered more assistance than the coronavirus relief package passed by Congress.
The federal student loan interest rate is set to 4.53% for the 2019-2020 school year, down from last year’s 5.05%. A student with $25,000 in loan debt pays about $90 per month in interest. With the 60 days of waived interest now in effect, the average borrower will save a couple hundred dollars.
Perhaps more meaningfully, student loan borrowers are also granted forbearance — they can suspend payment through September 30 without fear of accruing extra fees or interest. “These are anxious times,” DeVos said in the Department of Education’s announcement last week. She expressed hope that the break for student loan borrowers would provide “meaningful help and peace of mind.”
Next Steps for Student Loan Borrowers
Interest automatically dropped for federal student loans
Interest rates on all federal student loans will be automatically changed to 0% until September 30.
Overdue accounts automatically receive forbearance
If you are more than 30 days past due on student loan payments, you will automatically receive forbearance until September 30.
Opt-in to forbearance for relief from loan payments
All other borrowers must request administrative forbearance for your federal student loan. Contact your loan servicer’s customer service for assistance or call 1-800-4-FED-AID.
Guidance for Public Service Loan Forgiveness (PSLF)
According to the Consumer Finance Protection Bureau, suspended payments under federal Direct loans will count toward the 120 on-time payments needed to qualify for loan forgiveness, so long as the borrower continues to meet PSLF elgibility criteria.