As we reported, the president signed an August 8 executive memo ordering the U.S. Education Department (ED) to do things regarding the requirements and conditions to continue temporary payment cessation and interest waivers on certain federal student loans. Unfortunately, nobody quite knew what this meant. But we now have the answer.
ED has announced that all borrowers with federally held student loans will have required payments automatically suspended until calendar year 2021, and that the interest rate on federally held students loans will continue to be set at 0% until that time. Collections on defaulted federally held student loans also remain halted until the new year begins.
The term “federally held student loans” means loans made under the:
- Federal Direct Loan Program;
- Old Federal Family Education Loan Program (FFELP) that were made by commercial lenders, but only if those lenders have turned those loans over to ED; and
- Old Federal Perkins Loan Program that were made by postsecondary schools, but only if those schools have turned those loans over to ED.
Are you still repaying a FFELP or Federal Perkins Loan that hasn’t been turned over to ED? And what if you’re repaying a private student loan? Sorry. You get no payment suspension or 0% interest rate.
But if you do have a federally held student loan and you wish to make one or more payments on it during the rest of 2020, you’re welcome to do so.
Democrats in Congress wanted to extend payment suspensions and 0% interest on federally held student loans for another year — through September 30, 2021. They also wanted to expand those suspensions and that interest rate to all student loans, even private and other federal student loans not federally held. However, congressional Republicans refused to agree. So, in the absence of any new law, this executive action is a relief measure for Americans struggling due to the COVID-19 pandemic.
Should changes occur on any of this, we will post another article about it.
Follow the College Affordability Solutions website to get the latest news on developments related to your efforts to control and pay postsecondary educational costs.