"… the order waives the requirement that borrowers pay interest on federally-held loans, a Department of Education spokeswoman said, including loans in income-driven repayment and loans in forbearance. That means borrowers will still keep paying, but it will only be on the loan’s principal.
The interest waiver is automatic and effective immediately. The department will start putting the measure into effect over the next week or so, the spokeswoman said.
Earlier in the day, Treasury Secretary Steven Mnuchin said the Trump administration was weighing whether to let student-loan borrowers temporarily stop making payments." …
I don’t understand how this is supposed to help those affected by Covid-19 at all. It’s not deferring payment or reducing the payment amount. You still need to pay your regularly scheduled amount, so while not having interest accruing is nice it doesn’t do much in the way of short-term relief for those out of work due to Covid for whatever reason (work closed, daycare issues, illness)
Information still not available re: student loan interest being paused temporarily. NASFAA is working to get more clarification, but this is from NASFAA News Today:
At a press conference Friday afternoon in which President Donald Trump declared a national emergency due to the novel coronavirus outbreak, he also announced he would be pausing the interest on federal loans to support impacted student borrowers — though it’s unclear exactly how that change will be implemented …
The interest accrual pause would apply to all federal loans, including those in income-driven repayment plans, those in forbearance, federally-held Federal Family Education Loan Program (FFELP) loans, and federally-held Perkins loans. The interest waiver will be automatic, retroactively dated to Friday, though Department of Education (ED) officials said it may take time to operationalize.
But I do agree with the poster who asked how this interest stoppage is going to help anyone. They will still be required to make their loan payments. For folks furloughed from their jobs…an interest stoppage isn’t going to help them pay their bills now.
It’s possible for those in repayment to only pay the interest amount each month. My daughter has two student loans and both state the amount of interest due and the amount of the payment being posted to principal. She’s at the beginning of the repayment, so if they did suspend interest payments her payments would drop to about $10 (from $40) per month for one and about $30 ($230) for the other, which would be a big help to her budget.
Of course, suspending them all together would be better!
Ok, so this would be a big help for people like your daughter.
Totally aside from the virus crisis…I’m also wondering if this is also an exercise to see if having a time period (how long?) of zero interest that people will be able to make more serious progress on their debt, if their debt isn’t a huge amount.
If people are furloughed/laid off and then go into IBR, then wouldn’t stopping interest mean that they won’t later on see a huge jump in what they owe?
IBR is an amount based on how much you are currently earning. It doesn’t really matter how much of your payment is interest or principal. Sometimes the IBR is $0. I’m not a huge fan of IBR because it is not set up for the ex-student to ever pay off the entire amount.
I think this proposed program is not IBR but paying an amount each month (who knows how much) that goes directly to principal. I agree with @thumper1 that unless they adjust the monthly payment, it’s not going to help the person make the $300 or $400 payment per month. It’s nice that it will all go to principal, but it still hurts the wallet each month when, as now, many have just lost jobs or at least some income.
I was just saying that it is easy to know the amount of the monthly payment that is going to interest and the amount to principal. If they don’t adjust the monthly payment amount, it will be hard for those who have reduced incomes to make the payments.