Yahoo Finance Student loan pause from Trump executive memo confirmed by Education Department
The Education Department (ED) confirmed on Friday afternoon that it “fully implements” the president’s Aug. 8 executive memo pausing federally-backed student loan debt for 43 million borrowers, extending the interest-free freeze until the end of the year.
Education Secretary Betsy DeVos announced that her agency’s Office of Federal Student Aid (FSA) has enacted the payment suspension by setting interest rates on “all federally held student loans” to 0% through the “end of the calendar year.”
The FSA is also suspending collections on defaulted federally-held student debt and pausing wage garnishment. At the same time, non-payments for those on the Public Service Loan Forgiveness (PSLF) program should still be counted towards their 120 payments.
‘Smartest thing to do for everyone involved’
The action by ED will extend the policy first announced in mid-March. The protections for federally-held student loans were set to expire on September 30, as codified by the CARES Act.
“Thank goodness,” Betsy Mayotte of The Institute of Student Loan Advisors (TISLA) told Yahoo Finance. “This was the smartest thing to do for everyone involved.” Mayotte added that “the relief that it provides is enormous, needed because we're not out of the woods yet.”
Not all consumer advocates were satisfied, particularly given that private student loans are not affected by this action.
“There are 9 million borrowers who haven’t received any help and it looks like they’ll be left behind,” Seth Frotman at the Student Borrower Protection Center told Yahoo Finance. “What we’re doing here is kicking the can down the road.”
Frotman emphasized that “we still have tremendous number of Americans out of work, millions more struggling financially,” adding: “It’s not as if all our problems will be solved on January 1.”
Mayotte echoed that sentiment, noting that “my fear is that Congress is going to feel like, well, we don't have anything left to do because the executive order did it, and that's not true.” She added that Congress should first consider extending this action to other borrowers, and also loosen bankruptcy protections.
Presidential candidate Joe Biden’s proposal may offer more relief to borrowers come January, if he were to be elected president. The former vice president’s plan reportedly involves cancelling $10,000 in student loan debt for all 43 million federal student loan borrowers.
“Young people and other student debt holders bore the brunt of the last crisis,” Biden tweeted in March, as the pandemic began its brutal assault on the country. “It shouldn't happen again.”
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Aarthi is a reporter for Yahoo Finance covering education. Follow her on Twitter @aarthiswami. If you are a student loan borrower who is struggling with your debt and would like to share your experience, reach out to her at [email protected]
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