The COVID-19 pandemic and subsequent shutdown of the economy has caused many people and families to experience significant financial hardship. As a result, the government passed the CARES Act earlier this year. Part of this Act suspended payments on federally held student loans until September 30, 2020. This was done in order to help the American people as they work towards financial stability during this difficult time without requiring them to continue paying certain loans.
While there is still uncertainty of the future, President Trump signed an Executive Memorandum directing U.S. Secretary of Education Betsy DeVos to extend this suspension through the end of the year. Continue reading below to learn more.
What is the Presidential Memorandum on Student Loan Relief?
When federally held student loan payments were originally suspended, it helped individuals in a number of ways. Due to the fact that people are still struggling financially, President Trump signed an Executive Memorandum in order to extend this relief. In his Executive Memorandum, President Trump directed DeVos to “provide such deferments to borrowers as necessary to continue the temporary cessation of payments and the waiver of all interest on student loans held by the Department of Education until December 31, 2020.”
Secretary DeVos Implements Student Loan Payment Suspension
In response to the President’s memorandum, Secretary DeVos announced that she fully implemented the directive and directed Federal Student Aid to extend the student loan relief. Interest on eligible federal student loans has also been set to 0% during this time. In addition to this, Secretary DeVos announced two further initiatives:
- Collections on defaulted, federally held loans will continue to be halted. Any borrow with eligible federal student loans whose wages are being garnished will receive a refund of those amounts.
- Non-payments by borrows who are working full-time for qualifying employers will count toward the 120 payments required by the Public Service Loan Forgiveness program and as payments that are required to receive forgiveness under an income-driven repayment plan.
Federal Student Aid is working with student loan services in order to notify borrowers of the extension relief. The notice states that the outreach program will continue to an eventual return to student loan repayment, and they should see the extension reflected in their accounts over the next several weeks. It is important to note that borrowers have the option to continue making payments during this time, and these payments would be allocated to the principal of the loan and enable borrowers to pay off their loans more quickly and at a lower cost.
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