Updated August 9, 2020.
President Donald Trump will suspend federal student loan payments through December 31, 2020.
Here’s what you need to know.
After Congress failed to reach a stimulus deal Friday, Trump said during a press conference in New Jersey that he plans to issue an executive order on a host of economic issues, including student loans, a payroll tax cut, eviction moratorium and unemployment benefits if Congress fails to act on a stimulus package. On Saturday, Trump issued an executive order, including a memorandum on student loan payment relief. According to Trump’s memorandum, he will grant additional student loan relief and provide a payroll tax cut, enhanced unemployment benefits and an eviction moratorium. Trump, who is seeking re-election, sent the memorandum entitled “Continued Student Loan Payment Relief During the COVID-19 Pandemic” to U.S. Secretary of Education Betsy DeVos. Trump directed DeVos to extend several student loan benefits contained in the Cares Act (the stimulus package Congress passed in March) until December 31, 2020. It’s unclear at this point whether the executive order, which applies to federal student loans, will be expanded to include other federal student loans such as FFELP loans or Perkins Loans not owned by the federal government, which were not included under the Cares Act. The executive order apparently would not include second stimulus checks.
Student loan relief currently ends on September 30, 2020
Trump’s executive order would extend student loan relief under the Cares Act beyond September 30, 2020. The Cares Act:
- paused federal student loan payments;
- set interest rates at 0%, so interest will not accrue on your federal student loans;
- halted collection of federal student loan debt; and, among other benefits,
- “counted” non-payment of federal student loan debt toward the 120 required monthly payments for public service loan forgiveness.
Trump’s memorandum specifically references “continue the temporary cessation of payments and the waiver of all interest on student loans held by the Department of Education.” However, Trump’s memorandum does not specifically reference student loan debt collection or counting non-payments toward public service loan forgiveness, both of which were included as student loan relief in the Cares Act. The student loan relief included in the Cares Act followed Trump’s executive action earlier this year that provided similar student loan relief for 60 days prior to passage of the Cares Act. Absent an extension, the student loan relief in the Cares Act would expire on September 30, 2020. Without Trump’s new executive order, this means that your student loan payments would have resumed as early as October 1, 2020.
New stimulus: student loans
Trump’s executive order does not appear to include any elements of a stimulus proposal made by Sen. Lamar Alexander (R-TN). Alexander proposed a new student loan repayment plan as part of the Heals Act. Here are some highlights:
- No Student Loan Payments: If you have no income, you would make no student loan payments.
- 10% Discretionary Income: If you have income, your monthly student loan payments would be based on 10% of discretionary income.
- Student Loan Forgiveness: Like current income-driven repayment plans, you can receive student loan forgiveness after 20 or 25 years. Non-payments during months in which you pay $0 will count toward the 20 or 25 years for student loan forgiveness.
Alexander’s proposal would continue the federal student loan payment pause only for borrowers with no income. The 10% discretionary income proposal is similar to existing income-driven repayment plans that are available to federal student loan borrowers. Trump has publicly supported simplifying federal student loan repayment plans, including student loan forgiveness after 20 to 25 years of student loan payments.
How to pay off student loans
Even with this executive order, you will still owe student loan payments when the executive order ends. Therefore, make sure you have a game plan to pay off student loans. What’s the best way to start? Start with these four options, all of which have no fees:
Resources: Student Loans
15 secrets to refinance student loans
When will my second stimulus check come?
New stimulus today: second stimulus checks, unemployment benefits and more
What the stimulus means for your student loans
5 student loan changes for 2020
Trump: Second stimulus checks may be more than $1,200
Second stimulus checks: your questions answered
What Trump and Biden think about your student loans
Second stimulus checks: your questions answered
Trump wants at least $2 trillion for next stimulus
5 ways to get student loan forgiveness
Navient settles lawsuit — what it means for your student loans
Student loan refinancing rates are incredibly cheap