President Donald Trump (Photo by Drew Angerer/Getty Images)
(UPDATED MARCH 27, 2020)
There’s so much misinformation floating around right now about what to do with your student loans during the Coronavirus emergency. Let’s set the record straight.
Here’s what you need to know.
Student Loans: Coronavirus
It’s time to end the confusion. Here’s a quick true and false primer to make sure you understand all your options when it comes to your student loans.
1. “I don’t have to pay any interest on my student loans.”
FALSE.
Since the Coronavirus outbreak, borrowers have been searching for ways how to lower their monthly student loan payments. President Donald Trump temporarily waived all interest on federal student loans for 60 days. The interest waiver is automatic, so you don’t need to enroll with your student loan servicer. However, you still need to pay interest on your private student loans. Following Trump’s executive action, new congressional legislation - known as the CARES Act - would grant several benefits to help student loan borrowers manage their money due to the coronavirus emergency. The current benefits include no interest on your federal student loan payments through September 30, 2020.
2. “I can stop paying my federal student loans for 60 days.”
TRUE.
The CARES Act also allows you to pause payment on your federal student loans until September 30, 2020. Previously, Trump took executive action to suspend payment of your federal student loans for 60 days without any penalty.
3. “I don’t have to stop paying my student loans now.”
TRUE.
You don’t have to pause student loan repayment; it’s completely optional. You can still pay your monthly federal student loans, but your monthly payment amount will not change. Even though your interest rates are set to 0%, your full payment will be applied to your principal balance only (once all student loan interest prior to March 13, 2020 has been paid).
4. “I will get student loan forgiveness due to Coronavirus.”
FALSE.
Currently, there is no student loan forgiveness due to Coronavirus. That’s not to say there aren’t proposals to cancel student loan debt. For example:
- House Democrats proposed that every borrower receive $30,000 of student loan forgiveness.
- Senate Democrats unveiled a student loan forgiveness plan that would forgive at least $10,000 of federal student loans for all borrowers. Former Vice President Joe Biden supports $10,000 of student loan forgiveness.
- Sen. Elizabeth Warren (D-MA) proposed to cancel student loan debt for 95% of Americans.
- Sen. Bernie Sanders (I-VT) has proposed forgiving all $1.6 trillion of student loan debt, including both federal and private student loans.
- Biden has his own $750 billion student loan plan, which is centered on income-driven repayment.
- New York Governor Andrew Cuomo temporarily suspended collection of student loan debt and also suspended mortgage payments for those facing financial difficulty.
- While Trump called for the end of the Public Service Loan Forgiveness program in his annual budget, he proposed a simplified income-driven repayment plan with student loan forgiveness.
5. “An income-driven repayment plan will lower my interest rate.”
FALSE.
Income-driven repayment lowers your monthly payment, but does not lower your interest rate. While your monthly payment may decrease, you can ultimately owe more money because interest still accumulates while you have a lower monthly payment. After 20-25 years, you can receive federal student loan forgiveness. Unlike student loan refinancing, however, you won’t get a lower interest rate to pay off your student loans faster.
