President Trump announced that he would temporarily suspend payments for federal student loans due to the economic impacts of the coronavirus emergency.
Borrowers of federal student loans, but not private student loans, will have the option to suspend payments without penalty for 60 days. Borrowers may need to call their lender or servicer directly to request this. Lenders will be releasing more information as it becomes available.
“Today, Betsy Devos directed federal lenders to allow borrowers to suspend their student loans and loan payments without penalty for at least the next 60 days, and if we need more we’ll extend that period of time,” Trump said in a press conference.
Trump announced on Friday, March 13, 2020 that he would waive student loan interest on federal student loans held by the federal government, such as loans in the Direct Loan program. The suspension of interest on these federal student loans will be automatic.
Borrowers who wish to continue making payments, such as borrowers who are pursuing Public Service Loan Forgiveness, may do so. The full amount of their payments will be applied to the principal balance of their loans after any interest that accrued prior to March 13 is satisfied.
Longer Payment Pause Is Possible
Treasury Secretary Steven Mnuchin also said that the administration is also considering pausing student loan payments for up to three months, but nothing further has been announced on this.
This news comes as Senate Democrat Leader Chuck Schumer proposed an emergency student loan relief plan due to coronavirus. This would pause payments for the entire duration for the coronavirus. The U.S. Department of Education would make monthly payments on your federal student loans (not private student loans), guaranteeing a minimum pay down of $10,000.
The plan also stops all involuntary debt collections, wage garnishment, Social Security offsets and offset of income tax refunds for borrowers.
Senate Republicans are introducing a trillion-dollar stimulus package that suspends all federal student loan payments for up to six months. Student loan payments will be suspended initially for three months, with an option for an additional three-month suspension at the discretion of the U.S. Department of Education. Interest will be waived during this period.
How Can I Pause My Student Loan Payments?
Even for private loans, there are options to pause your student loan payments. Call your lender immediately to see what options are available.
If you have federal student loans and need more than the 60 day pause, many loans are eligible to be repaid on an income-driven repayment plan. Federal loans can also be deferred if you are unemployed or facing an economic hardship.
Alternatively, some private student loan borrowers might want to consider refinancing student loans for a lower interest rate. If you choose a longer repayment term, this could lower your monthly payment. The longer your repayment, the more interest you will pay, but it could be a good option if you’re struggling to make payments. Credible is a great tool for comparing multiple lenders at the same time. Keep in mind that refinancing federal student loans means a loss in federal benefits, including an option for income-driven repayment plans, generous deferment, and the possibility for student loan forgiveness.
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