President Donald Trump \(Photo by Joe Raedle/Getty Images)
President Trump says that he’s waiving interest on federal student loans.
Here’s what you need to know.
In an effort to mitigate the economic impact of coronavirus for every day Americans, Trump said he will waive interest on all federal student loans held by the federal government agencies. This emergency executive action comes hours after Treasury Secretary Steve Mnuchin told CNBC that temporary suspension of interest on student loans was “one of 50 different items we’re bringing to the president for a decision.” The details, including the mechanics, timing and duration, should be forthcoming.
Earlier this week, Senate Democrats proposed payment forbearance for six months on federally insured or guaranteed mortgages and federal student loans. Rep. Alexandria Ocasio-Cortez (D-NY) tweeted yesterday that student loan payments should be paused. The goal is to help borrowers from “incurring additional fees, compounding interest or negative incidents reflected in their credit scores.”
The coronavirus may continue to have a significant impact on the economy, including adverse impact to individuals, small businesses and corporations. With the potential for increased health care costs and possible job losses, Americans may start to feel the financial pinch from the coronavirus. (See What Coronavirus Means For Your Money).
Student Loans: 2020
Student loans have been a hot topic on the 2020 campaign trail. Sen. Bernie Sanders (I-VT), for example, has proposed forgiving all $1.6 trillion of student loan debt, including both federal and private student loans. Former Vice President Joe Biden has his own $750 billion student loan plan, which he has contrasted with the Sanders plan. Biden and Sanders both support the Public Service Loan Forgiveness program. Last month, Trump called for the end of the Public Service Loan Forgiveness program in his annual budget in favor of a simplified income-driven repayment plan that would offer the same student loan forgiveness plan for undergraduate borrowers, for example. U.S. Secretary of Education Betsy DeVos has explained why she believes it’s a good idea to end this student loan forgiveness program.
Remember, this announcement applies only to federal student loans (not private student loans). The plan should help you save money in the short-term, but you still need an action plan to pay off student loans. Regular payments for federal student loans and private student loans, at this point, would still be due. This upcoming waiver period is a good time to evaluate your federal and private student loans and determine your best path. Here are four places to start, all of which have no fees: