Federal education loans held by the US The Department of Education is eligible for an automatic payment suspension and interest waiver, which has been extended until December 31, 2020 Will the payment break be extended again? What happens to student loans after the payment break ends?
President Trump announced a 60-day payment suspension and interest waiver on certain federal student loans on March 13, 2020
The CARES law, which was enacted on March 27, 2020, automatically suspends repayment and sets the interest rate at zero on eligible loans until September 30, 2020
President Trump signed an executive order on August 8, 2020, directing Secretary DeVos to extend the suspension of payment and the interest waiver until December 31, 2020
Only loans held by the US Department of Education are eligible This includes the following loans:
FFEL program loans held in commerce and federal Perkins loans held by colleges are not eligible for payment suspension and interest relief Private student loans and private parent loans are not eligible
When President Trump announced the extension of the suspension of payment and the interest waiver until December 31, 2020, he said he could extend it further The signing statement was « Today I am extending this policy until the end of the year, and we will extend it more than that, most likely just after December 1 »
The decree itself made no mention of subsequent extensions, however, nor did the US Department of Education Press Release
The Heroes Act, which was introduced to the House on May 12, 2020 and passed by the House on March 15, 2020, extends the suspension of payment and the interest waiver until September 30, 2021 This legislation shows bipartisan support for an extension of the suspension of payment and the interest exemption
However, the Heroes Act is stuck in the Senate and it is not known if an extension of the payment break will be enacted during the lame duck
Millions of borrowers can face financial hardship if the suspension of payment and the interest relief are not extended
If the payment suspension and interest relief are not extended, loan managers will send letters and other communications to borrowers to let them know that repayment will resume on January 1, 2021
Borrowers who have signed up for AutoPay, where monthly loan payments are automatically transferred from their bank account to the lender, will likely need to re-register.After all, the lender will need confirmation that the lender’s bank account information ‘borrower are still valid
If a borrower is unemployed or experiences a pay cut, they may not be able to start paying off their student loans again. Borrowers who recently graduated or dropped out of school are more likely to to have been touched
There are a few options to continue withholding repayment after the payment break ends.These include postponing unemployment, postponing economic hardship, and abstentions Each of these options has a three year limit
Federal government pays interest on subsidized loans during deferral but not during forbearance Interest on unsubsidized loans remains payable by borrower during both deferment and forbearance If interest is not not paid as they run, they are added to the loan balance at the end of the deferment or forbearance period
Borrowers who are struggling to repay their federal student loans can also switch to an income-based repayment plan, which bases the monthly payment on a percentage of the borrower’s income, as opposed to the amount they must If the borrower’s income is less than 150% of the poverty line, the monthly loan payment is zero
The federal government pays the accrued but unpaid interest on subsidized loans during the first three years of the IBR, PAYE and REPAYE repayment plans, and half of the accrued but unpaid interest on unsubsidized loans During the remainder of the year repayment period, the federal government pays half of the accrued but unpaid interest on all federal student loans under the REPAYE repayment plan
I am editor and vice president of research for Savingforcollegecom, the most popular guide to college savings and 529 plans. I am an expert in student financial aid, the
I am editor and vice president of research for Savingforcollegecom, the most popular guide to college savings and 529 plans I am an expert on student financial aid, FAFSA, scholarships and student loans I have been cited in over 10,000 journal and magazine articles on college admissions and financial aid I am the author of four bestselling books on paying for college education and I have seven patents I sit on the Editorial Board of the Journal of Student Financial Aid, the Editorial Advisory Board for Bottom Line / Personal, and am a member of the Board of Directors of the Center for Excellence in Education I have two bachelor’s degrees in Mathematics and Philosophy from the Massachusetts Institute of Technology (MIT) and a Masters in Computer Science from Carnegie Mellon University (CMU)
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