WASHINGTON, DC: U.S. President Donald Trump departs the White House for a trip to Ohio where he will … [+]
As Congress was unable to agree on a second stimulus package, President Donald Trump signed an executive order on Saturday to continue relief amid the pandemic. The order extended a pause on monthly student loan payments for those with certain government-owned student loans.
Trump sent a memorandum to U.S. Secretary of Education Betsy DeVos on Saturday ordering an extension of relief for borrowers. The relief freezes payments and prevents interest from accruing between Sept. 30 until Dec. 31, 2020. The CARES Act suspended payments through the end of September, and now the memorandum extends that through the end of 2020.
If you have student loans, here’s what it means for your debt repayment.
Private Student Loan Borrowers Are Left Behind, Again
An estimated 9 million borrowers that originated or refinanced their student loans with a private lender have been excluded from the executive order. They also were not covered by the original coronavirus forbearance policy made available under the CARES Act. These borrowers must work with their lenders directly to discuss forbearance.
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Several private lenders, such as SoFi and Earnest, offer forbearance or loan modification programs to their customers. Depending on the lender, they may ask for documentation of financial hardship in order to qualify for forbearance. The terms of the forbearance will vary based on the lender’s policies.
Borrowers should reach out to their lenders if they are having difficulty making their payments to avoid defaulting on the loan.
Public Student Loan Forgiveness Isn’t Addressed
In the newly signed executive order, the Public Service Loan Forgiveness (PSLF) program is not addressed. PSLF incentivizes college graduates to work for a non-profit organization or government agency by forgiving their student loan balance after making 120 on-time payments. But Trump’s efforts to end the Public Service Loan Forgiveness program, along with not addressing the program in his executive order, has left borrowers worried.
The CARES Act signed in March notes that those who are aiming to qualify for PSLF will have each month of forbearance during the coronavirus emergency “count” toward this benchmark if they continue to work for a qualifying employer.
If you have been forced to take a job with a non-qualifying employer, such as a for-profit company during the pandemic, or had your working schedule cut below 30 hours per week, the payments you’ve made so far will still count toward PSLF. When you return to a qualifying employer, you’ll get credit for the payments you make in that new job. You just won’t get credit for the period when your work was ineligible for PSLF.
DeVos and the Department of Education are expected to announce in the coming days further details on how the executive order interacts with PSLF.
Those Who Qualify, Be Sure To Check With Your Servicer
Qualifying for the federal student loan forbearance extension is quite simple. As with the CARES Act, the freeze will be automatically applied to your account.
But borrowers should stay vigilant to make sure the forbearance extension is reflected accurately in their student loan accounts. Monitor your student loan servicer’s online portal to ensure you’re not being erroneously charged once the executive order takes effect.
If you have questions about the status of your loan, contact your loan servicer directly.