On Friday, Trump announced a 60 day reprieve from student loan interest and loan payments - recognizing the sudden and swift onset of economic problems for many of the nation’s 45 million student loan borrowers who collectively owe more than $1.6 trillion.
As with many of Trump’s recent pandemic response announcements where the clarifying details come later… there is widespread confusion. Here's what we do know:
What should people with federal loans do?
1. Call your servicer to opt-in for suspended payments
In a clarifying press release on Friday, the Department of Education affirmed that everyone will have their interest accumulation suspended for the next 60-days. No need for you to take action here
However, if you want to take advantage of suspended payments for the next 60-days, people must call their servicer to opt-in. Here’s a full list of servicers and their contact information taken from the Department of Education’s website:
Who should opt-in to the 60-day payment suspension?
If you have experienced a sudden change in employment in March like furlough, layoff, or a substantial pay cut, you should absolutely consider opting-in for a suspension of payments.
If you fear that your employment may be affected soon and want to conserve cash now for the months ahead, you should also consider opting-in. Your loans won't be accumulating interest so there isn't a downside of saving up cash now.
Some good news: if your job is secure and you still make your payments as normal, your payments will decrease your loan balance faster. This is because your loans won’t be accumulating interest during these 60-days and your payment will go directly to attacking your loan principal.
What should I do if I have issues with my servicer?
Wait times at servicers are likely to be long. Don’t be discouraged. And, if you feel that you have not been properly treated, you are encouraged to submit a complaint either to the Consumer Financial Protection Bureau or the Department of Education’s Student Ombudsman to escalate your issue.
2. Research Income-Based Payment Plans
If you haven’t previously considered an income-based repayment plan, now is a great time. These plans are great if you have a job, but have experienced a sudden change in income like loss of hours or a big pay cut, as a lower monthly payment can help cushion any income loss.
Fintech apps like Summer and GradJoy can help navigate the options to determine the best program for you. Even if you’re already enrolled in one of these programs, you may want to re-evaluate the best option in light of any changes to your finances.
3. Use Forbearance If Needed
Lastly, consider forbearance enrollment to delay payments on loans beyond the 60-day suspension granted. It’s most powerful for people who have been laid off and no longer have an income. You can apply with your servicer (see the list for their phone info) for an up to 12 month period.
However, the deferred payments while you’re in forbearance are added to your future payments so it’s not a long-term or permanent solution - only one to get you through current financial difficulties.
The situation is incredibly fluid and there are sure to be more updates, clarifications, and changes made in the days ahead. Stay tuned.
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