What does and doesn’t freeze Trump’s student loan interest
President Trump announced yesterday that he would freeze interest on student loans as part of his declaration of national emergency regarding the coronavirus outbreak. But with few details provided in its public announcement, student loan borrowers are wondering what exactly this means to them.
Here’s what President Trump’s student loan interest rate freeze would do:
- Interest accrued on certain federal student loans will be frozen. This means that no further interest will accrue on certain federal student loans in the future.
- The interest freeze on student loans will only apply to student loans ”held by federal government agenciesSuch as the US Department of Education and its contracted student loan service providers.
- The interest freeze on student loans is temporary, but will continue indefinitely until the policy is changed.
- The interest freeze on student loans will be implemented automatically, probably in the coming week (although the exact timeline is unclear).
While some applauded the president’s decision, there are a lot of things the declaration of national emergency does not To do:
- Private student loans are not covered by the interest freeze because these loans are not held by agencies of the US federal government.
- Some federally guaranteed student loans, such as federal Perkins loans and FFEL program loans, may not be subject to the interest freeze if they are not held by an agency of the federal government (which is the case for many of these loans).
- Borrowers must continue to pay their normal monthly payments on all student loans. Your monthly payment amount will not change and your payments will not be suspended. To be absolutely clear: the president’s statement does not include any relief from the student loan payment, whatsoever.
- For student loan borrowers who have already accrued significant unfunded interest (such as borrowers with income-tested repayment plans), all unpaid interest will still need to be paid first, before a payment is made. applied to the principal. This is required under federal regulations and the promissory notes underlying federal student loans, and President Trump’s statement does not change these conditions.
- For defaulting student loan borrowers, the so-called “forced collections” will continue. This means that student loan borrowers will still be subject to administrative wage garnishment, set-off of Social Security payments, and involuntary garnishment of federal and state tax refunds.
Ultimately, while President Trump’s interest rate freeze will suspend growth in the balance (or, in some cases, temporarily reduce the cost of repayment), student loan borrowers who are grappling with a loss of income or wages due to the coronavirus epidemic do not receive any direct student loans. reduction of the national emergency declaration.
This is an evolving situation, so stay tuned.