A payment holiday on federal student loans that the federal government introduced in late March is now scheduled to run through December 31.
In late March, as the pandemic began to spread through the country, the government suspended payments and interest on federal loans through September 30.
People who were candidates for Public Service Loan Forgiveness were able to receive credit toward the 120 payments needed to qualify for relief, even without having to make another payment until fall. Similarly, borrowers who were working their way out of default and bringing their loans current through the federal student loan rehabilitation program were also able to receive credit toward the nine payments they’re required to make.
The payment moratorium only applied to federal student loans, but a number of private lenders agreed to grant 90-day holidays if the borrower requested relief. There were some issues with credit reporting and accounts that had already been sent out to private collectors, but most borrowers got the relief they needed without incident.
Then, on August 8, with the pandemic still raging and Congress deadlocked over the next steps to help consumers, President Trump issued an executive order that seemed to extend the federal loan payment moratorium until New Years. Unfortunately, the order was somewhat hastily drafted and left out many significant details. The U.S. Department of Education has just issued a clarification of the president’s order that fills in the blanks in the original document.
The moratorium on federal student loan payments will continue automatically through December 31, without penalties or the accrual of interest. In addition, federal borrowers will receive credit toward Public Service Loan Forgiveness and loans in the federal rehab process without having to make a payment. As with the original relief package, the president’s order does not affect private student loans.
CEA members with questions are encouraged to contact Martin Lynch, director of education at Cambridge Credit Counseling, at mlynch@cambridgecredit.org, or by phone at (413) 883-3390.
