Your student loan payments will be on hold until December 31, 2020 – unless you have these types of student loans.
Here’s what you need to know.
After Congress left Washington without a stimulus bill, President Donald Trump has issued an executive memorandum to Extension of the student loan waiver until December 31, 2020. As a result, Minister of Education Betsy DeVos implemented the following yesterday:
This student loan relief, which mirrors the student loan relief in the Cares Act (the $ 2.2 trillion stimulus bill passed by Congress in March), extends the Cares Act from September 30, 2020 to December 31, 2020. However, this relief does not apply to private student loans. It was before DeVos’ actions It is unclear whether payment defaults will continue to apply to student loan waivers and whether the collection of student loans will also be discontinued. While many borrowers breathe a sigh of relief, there are millions of student borrowers who don’t all get student loans.
Do You Get Student Loan Ease?
The Nursing Law not apply to all federal student loans. Why? Under the Cares Act, “federal student loans” only includes federal student loans that owned by the US Department of Education. This includes direct loans such as Stafford loans, but excludes other types of federal student loans that not federally owned such as FFELP loans and Perkins loans. FFELP loans are federal student loans that were made to borrowers by private banks and financial institutions prior to 2010 and are therefore not federally owned. Perkins loans are a type of student loan that are typically owned by colleges and universities. If you have one of these types of student loans, you will not get any student loan relief for these loans and payments would be due in the normal course. To be clear, Congress, not DeVos, drafted the Cares Act and decided which federal student loans to take out. Because the federal government does not own these types of student loans, they are similar to private student loans in that the federal government cannot unilaterally allow borrowers to suspend payments or change interest rates.
Proposal to take out FFELP loans to facilitate student loan
There are two legislative proposals to give FFELP and Perkins borrowers the same student loan relief that direct borrowers enjoy:
- The Student Loan Equity Facilitation Act; and
- The Covid-19 Perkins Loan Relief Act
The Equity in Student Loan Relief Act, if passed, would work as follows:
- the US Department of Education would make arrangements with the owners of the FFELP loans.
- The Department of Education would pay all interest payments during this time and the FFELP loans would be suspended.
- All involuntary student loan recoveries would also cease during this period.
- Failure to pay FFELP loans would be “counted towards” student loan relief programs.
Expert tip: If you have FFELP loans and you intend to get government waivers, you will need to consolidate your FFELP loans into a direct consolidation loan before any of the 120 monthly payments required for student loan waiver are counted.
Proposed Perkins Loan Loan Facilitation Facility
Elise Stefanik (R-NY) MP, who introduced the Equity in Student Loan Relief Act, also introduced the Covid-19 Perkins Loan Relief Act to the US House of Representatives. The Covid-19 Perkins Loan Relief Act would allow nearly 2 million student loan borrowers with Perkins Loans to receive student loan relief that is currently unavailable.
“COVID-19 presented significant challenges and uncertainties … in student loan payments,” said Stefanik when introducing the law. “This bipartisan legislation fills a loophole in CARES law and allows people on Perkins loans to defer payments … while we recover from the COVID-19 crisis.”
If passed, the bill would look like this:
- the US Department of Education would make agreements with colleges and universities that own the Perkins loans.
- The Department of Education would make all interest payments during this period and payments on Perkins loans would be on hold.
- All involuntary student loan debt collections on Perkins loans would also cease during this period.
- Failure to pay Perkins loans would be “counted towards” student loan relief programs.
Congress did not pass any of the legislative proposals, which means that FFELP loan and Perkins loan borrowers will not benefit from student loan facilitation. There are also no immediate plans to include these student loans in stimulus packages or executive measures, frustrating millions of borrowers.
This is how you pay off student loans
Whether you have government student loans (including FFELP and Perkins loans) or private student loans, you need a student loan game plan.even if you get a student loan. Remember that all student loan facilities are temporary until December 31, 2020 and your balance and regular interest rate will still be there on January 1, 2021. How can you best pay off student loans? Start with these four options, all of which have no fees:
Resources: Student Loans