U.S. Secretary of Education Betsy DeVos on Friday executed President Donald Trump‘s memorandum that gave borrowers of federally held student loans prolonged relief, lasting until the end of the calendar year without penalty.
The action leaves interest rates at 0%, pauses collections and ensures that nonpayments will count toward forgiveness.
Earlier this year, the same loans were suspended until September 30 by the far-reaching CARES Act stimulus package, which halted collections on defaulted loans and all non-payments counted toward the 120 payments required by the Public Service Loan Forgiveness (PSLF) program. The CARES Act was pushed through to give economic relief to businesses and workers as the novel coronavirus spread across the U.S.
As negotiations for another stimulus bill stalled, Trump signed an executive memorandum for education debt relief on August 8. The memorandum directed the education secretary to grant deferments to borrowers that would temporarily cease payments and waive all interests on student loans until December 31, 2020.
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Borrowers have the choice to continue making payments during this time. Those payments would be assigned to the principle of the loan, allowing borrowers to pay off the balance of the loan faster and with less interest.
DeVos also announced that collections on federal student loans will be halted. Similarly, any borrower with eligible student loans, whose wages are being garnished, will receive a refund of those amounts.
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“During this extended time frame for the payment suspension, collections on defaulted, federally held loans are still halted, and any borrower with defaulted federally held loans whose employer continues to garnish their wages will receive a refund of those garnishments,” a statement read, as reported by Forbes.
Along with student loan servicers, FSA is working to notify borrowers of the extended relief and will also inform them that the program will continue into the fall and until the time when there is a return to regular student loan repayments.
This most recent extension will be shown in borrowers’ accounts over the next several weeks.
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