02 Jan Freeze on Student Loan Payments and Interest Extended through January 31, 2021
At Accolade Financial, we understand that locating sources of financial aid to pay for college and later repaying student loans can be challenging. This is especially true during the coronavirus pandemic since many students and parents have lost jobs or had their hours reduced. Fortunately, President Donald Trump and United States Secretary of Education Betsy DeVos realized this struggle in the early days of the pandemic.
The Initial Student Loan Repayment Freeze
The Heroes Act of 2003 gave Secretary DeVos the authority to implement several changes regarding student loan repayment during a nationwide crisis. The highlights of the education secretary’s actions include:
- Setting the interest rate on all federal student loans to zero.
- Placing all student loan borrowers into an immediate administrative forbearance, which makes it possible for them to delay payments without penalty.
- Pausing garnishment of wages for student loan borrowers who have gone into default.
- Providing the option to not make payments toward federal student loans from March 13, 2020 to September 30, 2020. On August 8, 2020, President Trump requested DeVos to extend the freeze on payments, forbearance, and interest until December 31, 2020.
These changes only impact federal student loans and have no bearing on private student loans, Perkins loans, or student loans under FFELP. These include debt consolidation for student loans, the Parent Loan for Undergraduate Students (PLUS), subsidized Stafford student loans, and unsubsidized Stafford student loans. Students and parents can continue to make payments toward loans during the freeze period if they wish.
President Trump Authorizes Second Extension for Pause of Student Loan Payments
In a move that surprised many, President Trump recently authorized another extension on student loan relief through January 31, 2021. Although some members of Congress have proposed extending that even further to as far away as September 30, 2021, it does not appear likely at this point that another extension will take place. Here are some of the reasons why that may not occur:
- Other student loan debt programs exist that allow borrowers to reduce their monthly payments. Depending on the circumstances, they may not need to make a monthly payment at all.
- When the most recent extension expires on January 31, 2021, student borrowers will have had more than a 10-month break from repayment obligations. Several members of Congress believe this is adequate.
- Other taxpayers bear the burden of subsidizing those not currently making student loan payments. Some feel this is unfair as two-thirds of American adults either did not go to college or currently do not owe money on student loans.
- The relief program is available to everyone who owes money on federal student loans regardless of income or ability to pay.
Need Help Understanding Your Options for Student Loan Repayment?
Finances are a huge concern for many people right now. When you add in the stress of financing college, the situation can seem even more overwhelming. Accolade Financial is here to help. Please contact us for assistance with evaluating financial aid options and repaying student loan obligations in these trying times.