Trump Suspends Federal Student Loan Payments, Waives Interest During National Emergency
Here's what we know
- U.S. Secretary of Education Betsy DeVos announced on March 20th that the office of Federal Student Aid is executing on President Trump's promise to provide student loan relief during the COVID-19 national emergency.
- All federal student loan borrowers with federally held student loans will automatically have their interest rates set to 0% for a period of at least 60 days.
- Secretary DeVos has authorized an automatic suspension of payments for any borrower more than 31 days delinquent as of March 13, 2020, or who becomes more than 31 days delinquent.
- All borrowers will have the option to suspend their payments for at least two months. To request forbearance, borrowers should contact their loan servicer online or by phone.
- If you are seeking PSLF, you need to continue payments to remain eligible.
What To Do If You Cannot Afford Your Student Loan Payments
If you have federal student loans
- If you’re unable to make your next monthly payment, contact your servicer to ask about your options. You can request a temporary deferment or forbearance. With either of these options, you can temporarily suspend your payments. Interest will not accrue during this period of deferment or forbearance.
- If your income changes, consider switching to an income-driven repayment plan, which would allow you to lower your monthly payments.
If you have private student loans
- The Federal Reserve recently lowered interest rates, and you may qualify for a lower interest rate loan—even if you’ve already refinanced your student loans before. Compare your options.
- If you’re unable to make your next monthly payment, your options vary based on the loan servicer. Some private lenders do offer their own forbearance or deferment options. And a few may have hardship programs that can temporarily lower your interest rate or payment amount. These programs are often granted on a case-by-case basis, so we recommend calling your student lender directly to explain your personal situation and see what options they provide.
How Zero-Interest Is Helpful To Borrowers
“Obviously, any interest not accruing to one’s account is helpful and it saves borrowers money in the long run,” Logan Allec, CPA and owner of Money Done Right, tells Pillar. If you’re trying to pay down your student loan debt faster—and can afford to do so—you can also make additional payments, even if that means adding a few more dollars onto your payments. For instance, if you’re eating in more, you can allocate eating-out money toward your student loan debt.
But Allec says that whether or not borrowers should pay more each month is a highly individualized decision. “There’s the mathematical aspect and there’s the subjective aspect,” he says. “If you have loans at 3% interest, they may theoretically earn a greater return on investing their extra money rather than trying to pay down their loans as quickly as possible,” he says. “However, if paying off student loans as quickly as possible is extremely motivating to someone, it may make more sense to just focus on that and not worry too much about the opportunity cost.”
In any case, Allec says that now’s the time for borrowers to take a close look at their budgets and make sure they have an emergency fund in place. “We could very well be on the verge of a recession, and job losses and cut hours are both possibilities,” he says. “With a solid emergency fund in place, however, you will be able to still keep up with your student loan obligations even when circumstances aren’t the best.”
Updated on March 20, 2020 and we will continue to update it accordingly. In the meantime, we want to remind you that we’re always here to help—just email firstname.lastname@example.org. Our team is ready to respond to your questions about your student loan payments.