How does student loan extension work? What you need to know


The latest from President Donald Trump Student loan debt Extension of relief has confused borrowers.

On August 8th he gave a memorandum Arrange a 0% extension to the current interest rate and a suspension of payments for federal student loan borrowers until December 31st. It was one of four executive Actions (only one of which was a full-fledged executive order) which Trump signed as Conversations broke down for another stimulus package from Congress.

The CARES law that $ 2.2 trillion stimulus package It was passed in March and granted student loan relief until September 30th. Under the CARES Act, payments, interest and recoveries on government-held student loans have been suspended.

Trump’s presidential memorandum is similar, but “the devil is in the details,” attorney Kyra Taylor National Center for Consumer Lawsaid Business Insider. The move may be good for some borrowers, she said, but it does not extend all of the reliefs of the CARES Act and leaves many unanswered questions.

“Currently, many Americans remain unemployed due to the COVID-19 pandemic and many more have accepted lower wages and hours as states and communities continue to impose social distancing measures,” Trump wrote in the memo. “It is therefore appropriate to extend this policy until the economy has stabilized, schools are reopened and the crisis caused by the COVID-19 pandemic has subsided.”

We know this

  • The memorandum leaves discharge for 9 million student loan borrowers, Seth Frotman, CEO of Student Borrower Protection Agency (SBPC) and former student loan regulator, Business Insider said.
  • If you are a borrower with a. are Federal student loan from the federal government, you don’t have to make any payments or interest until the renewal expires.
  • If you are a borrower with a. are Personal Student Loan, Commercial State Student Loan, or Perkins State Loan, you have to make payments as usual according to SBPC. (The CARES law too Withheld relief from borrowers with loans not held by the Ministry of Education.)
  • The extension occurs on October 1st. All borrowers covered by the CARES Act can continue their payments until September 30th.

We do not know that

  • Will this extension relief take place automatically?
    Taylor said it was unclear whether this relief would be opt-in or opt-out.
  • How will this affect the protection of defaulting borrowers?
    The CARES Act has suspended payments for defaulting borrowers, but the memorandum does not address that suspension.
  • How will this affect borrowers who have run into financial difficulties?
    Borrowers who are in financial distress (e.g. prolonged unemployment) can suspend loan payments for up to three years without interest. Taylor explains in a blog post. However, the memorandum does not specify whether borrowers who have complied with the three-year period will receive extended relief or whether this emergency deferral will count towards the three-year period.
  • Will this emergency grace period for borrowers be considered eligible time under the Public Service Loan Plan (PSLF)?
    Under the CARES Act, the months that PSLF borrowers fail to pay were counted towards the 120 month public service loan remission payment request. The memorandum does not state whether this will continue.
  • How is this implemented?
    As Business Insider asked Ministry of Education As the extension is being implemented, a spokesman said: “We are waiting for information to share with you.”

What it all means

Many student loan advocates have criticized the memorandum for being vague and making no long-term difference. That’s what Rebecca Harrington reports from Business Insiderr that Trump’s executive measures, along with the three other executive measures he has taken, may not do too much because they will be so difficult to implement.

Attorney Adam S. Minsky wrote that this move opposed the Democrats’ proposal for a 12-month extension of the CARES student loan provisions, as well as expanded provisions for those borrowers excluded from this relief and loan waiver for financially distressed borrowers.

A better move, Taylor said, would have been broad-based debt relief. “At least [we] should have expanded all the facilities CARES provides to all federal student loan borrowers, “she said.

SBPC’s Frotman also said the move wasn’t enough. “The president’s actions on student debt are nowhere near what Americans need to stay afloat in this unprecedented health and economic crisis,” he said. “Pausing payments will only go down the drain on borrowers facing job losses and financial upheaval – including millions who were in distress before the pandemic.”

Taylor advises borrowers to look out for more details on the DOE website to see if they need to opt for the relief and to ensure their interest does not accrue during the suspension period.

“There’s too much we don’t know,” said Taylor. “So people can’t assume what’s next when it comes to their student loans.”


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