Update: The US Department of Education now says Trump’s suspension can count towards forgiveness of public service loans. Read more here.
Over the weekend, President Trump extended the suspension of student loan repayments by three months. This is a big win for many student borrowers, but some will not be so happy.
Borrowers who hope to get a Public Service Loan Discount (PSLF) will not benefit as much from Trump’s executive order as other borrowers. Non-payments will not count because of the way it defers student loan payments. The text of his command reads as follows:
“Second. 2. Extension of Student Loan Payment Relief. (A) In light of the national emergency declared on March 13, 2020, the Secretary of Education will take action in accordance with applicable law to effect waivers and appropriate modifications to the requirements and conditions for deferral of economic hardship described in Section 455 (f) (2) (D) of the Higher Education Act of 1965, as amended, 20 USC 1087e (f ) (2) (D), and grant borrowers the necessary deferrals to pursue the temporary suspension of payments and the waiver of all interest on student loans held by the Department of Education until December 31, 2020. “
The key words of this text are “differentiation of economic difficulties”. These deferrals are available to student borrowers today, but do not count toward the 120 payments required for borrowers to clear PSLF loans.
When Congress suspended student loan payments under the CARES Act, many questioned whether the suspension would count toward the number of payments required for the Public Service Loan Forgiveness Program (PSLF). Fortunately, Congress included language that said if the borrower had otherwise qualified, non-payments would count towards forgiveness. Thus, if a borrower was still employed by a qualified employer, the months of non-payment counted towards the PSLF.
But the CARES law suspension expires on September 30, 2020. This will likely cause a lot of confusion for many student borrowers. In the midst of a pandemic, many will think that Trump’s executive order is an extension of the CARES Act, but it is not.
All borrowers hoping to get the PSLF must make their payments after September, otherwise they will have three more payments left before they receive a loan forgiveness. In addition, they will benefit from the interest suspension and will be able to repay their loan balance faster, although most PSLF borrowers do not care.
However, there is still time for Congress to take action and expand the benefits of the CARES Act. While the improved unemployment benefits under the CARES Act have already expired, the student loan payment hiatus lasts until September. Negotiations are at a standstill, but as the pandemic continues to cost lives and hurt the economy, the pressure to secure a deal is likely to intensify.
For more information on the Civil Service Loan forgiveness program, click here or call your student loan manager.
Trump’s proposed executive order raises questions for student borrowers
CARES Act helps most student borrowers apply for loan forgiveness
Senate GOP wants stimulus checks but not student loan relief
What the coronavirus boost means for your student loans
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