August 14, 2020
Recently, President Trump stated in a memorandum that the federal loan payment pause will be extended through December 31 of this year, meaning students won’t have to pay loans until 2021. Earlier, this year, the (CARES) Act, providing benefits that help students struggling with paying loans during the pandemic, was passed that halted federal student loans from only March 13 to September 30.
The forbearance period applies to federal loans, such as Direct Loans (Stafford, Grad PLUS, Parent PLUS, and Consolidation loans), FFEL (Family Federal Education Loans), and Perkins Loans that are through the U.S. Department of Education.
“If you have FFEL or Perkins Loans owned by a third-party lender that isn’t connected to the Department of Education, the CARES Act provisions won’t extend to them. You also won’t qualify for student loan forbearance and other benefits for private student loans,” published Fox Business.
There will also be no added interest to your loans during this period, though this does not change your interest rate. According to the Consumer Financial Protection Bureau (C.F.P.B.), your federal loan servicer will suspend the interest, and there is no action needed from you.
The CARES Act also allows for every non-payment to go towards the 120 required monthly payments for the Public Service Loan Forgiveness Program (P.S.L.F). The federal program forgives student loans for those who are a full-time employee (working more than 30 hours) in an eligible state, federal, or local public service job or nonprofit job and make 120 on-time monthly payments. Although, loan forgiveness is not addressed in the memorandum. The U.S. secretary of Education, Betsy DeVos is expected to release details on how the memorandum affects the P.S.L.F. program.
Students looking for loan forgiveness may be delighted to know that, according to Forbes, House Democrats have proposed $10,000 of student loan forgiveness only for people struggling financially – The Senate has not passed it yet.
Trump also made a few other executive orders on a deferment on payroll taxes, extension on unemployment insurance, and a suspension on rental evictions that have federal financial backing.
The deferment of payroll taxes only affects those with an annual salary of less than $100,000 and has been in effect since August 1, and will be until the end of the year. Trump also says that $400 per week will be provided in unemployment benefits.
Even if you are not making payments to federal loans that are delayed, it won’t negatively affect your credit score. Students are still able to pay their federal loans if they want to get rid of them faster.
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