People with student loans got some good news Friday. President Trump said the government would give almost all federal student-loan borrowers the option to suspend payments for at least two months.
“Right now, everyone should be focused on staying safe and healthy, not worrying about their student loan balance growing,” Education Secretary Betsy DeVos said in a statement.
The government said on March 13 it would temporarily stop collecting interest on many student loans until further notice.
Servicers of student loans are reporting high call volumes. At least one, FedLoan Servicing, on its website warns that it is “currently experiencing limited access to our call center locations,” but is processing “email, forms, and letters as quickly as possible.”
“We are having challenges like every business because people need to work from home and some may in the future need to be in quarantine,” said Scott Buchanan, executive director of the Student Loan Servicing Alliance, a nonprofit that represents the companies that send bills and collect payments on student loans. “Our operations are working but at reduced capacity,” he said.
Here is how the temporary suspensions of payments and interest will work.
The repayment and interest suspensions apply to most of 43 million Americans who owe $1.5 trillion in federal student debt.
The two initiatives apply to borrowers who are either current on their loans or in delinquency, defined as more than 30 days late on payments. They don’t apply to loans in default, which means payments are 270 or more days late.
The suspensions apply to loans the Education Department holds under the federal direct program, in effect since 2010, and to some of the loans issued under the now-defunct Federal Family Education Loan program.
The suspensions cover undergraduate and graduate students with Stafford loans and parents and graduate students with federal Plus loans. They also apply to borrowers using income-driven repayment plans and loan-forgiveness programs.
The suspensions don’t apply to loans issued under the Federal Family Education Loan program that are currently held by commercial institutions, rather than the Education Department.
Student loans issued by private lenders also don’t qualify, although some private lenders allow for temporary loan repayment suspensions. (Check the fine print of your loan contract and call your lender to ask if they are offering any additional flexibility.)
If you aren’t sure whether your loans qualify, contact your service provider.
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In his address Friday, Mr. Trump said the Education Department will allow borrowers to suspend student-loan payments “without penalty for at least the next 60 days and if we need more, we will extend that period of time.”
Borrowers who are current on their loans who wish to suspend payments should contact their loan servicer online or via phone to enroll, Mr. Buchanan said.
They won’t need to fill out a form or provide documentation of economic hardship, job loss or other events the federal loan program normally requires when considering requests to temporarily suspend repayments, a process often called forbearance.
Those who are current on their loans who don’t enroll in the forbearance program must continue with monthly payments.
A spokesman for student-loan servicer Navient Corp. says the company has updated its website with details about the suspension programs. Borrowers can use an automated phone number, 888-272-5543, to request the payment suspension.
Mr. Buchanan said loan servicers are striving to add a forbearance option to online accounts.
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The repayment and interest suspensions apply to most of 43 million Americans who owe $1.5 trillion in federal student debt.
What type of student loans and borrowers do these initiatives apply to?
How can I suspend my payments?
Is anyone getting automatic suspension of repayments?
In a statement the Education Department said it “has also authorized an automatic suspension of payments for any borrower more than 31 days delinquent as of March 13, 2020, or who becomes more than 31 days delinquent.”
While those in delinquency don’t need to call to request that their payments be suspended—suspension is automatic for them—they should still call, Mr. Buchanan said.
That way, the loan servicer can discuss with them repayment options for when the coronavirus emergency is over. Options may include repayment plans for federal loans that cap student-loan payments at a portion of a borrower’s annual discretionary income.
How does the interest suspension work?
On March 13, the administration said that it would temporarily stop charging interest on most federal student loans, until further notice.
Under the measure, monthly payments won’t decrease. The benefit is that your entire payment will now count toward reducing the loan’s principal, which helps you pay off the loan faster.
While the waiver went into effect on March 13, Mr. Buchanan said that borrowers who log into their accounts online may still see interest accruing. The waiver, he said, “is going to take some time to implement.”
“It could take a week or two weeks,” he said. “We are
going to get it done as soon as possible. We will go back and retroactively remove the interest that accrues after March 13.”
Are other measures being considered?
Senate Republican leaders want to suspend monthly student-loan payments for up to six months, with no interest accruing until borrowers resume paying. Senate Democratic leaders, meanwhile, back forgiveness of at least six months of payments to reduce each borrower’s balance by $10,000 and possibly more.