On March 13, 2020, President Donald Trump declared a national state of emergency in response to the ongoing spread of the Coronavirus (COVID-19) which is now classified as a global pandemic. As part of this declaration, he announced that there would be a waiver of interest payments on all federal student loans. “I’ve waived interest on all student loans held by federal government agencies, and that will be until further notice,” President Trump said during his statement. At Southwest Recovery Services in Dallas, TX, our team of professional debt collection agents understands how important it is to act with unity during this unprecedented time of crisis, and we feel it is important to spend time clarifying some of the confusion that may be circulating regarding this decision among our clients, and our readers.
Follow Up Actions
On March 20, 2020, Education Secretary Betsy DeVos acted to confirm the waiver by issuing a press release that contained a more detailed explanation of the announcement. In fact, the press release went a step further by requesting that federal student loan servicers grant forbearance (also known as a temporary stop on payments) to anyone who requests such an action for a period of 60 days starting from the initial announcement by President Trump. As part of this measure, anyone who was already 31 days or more past due on their payments would also have their payments suspended for the duration of this 60-day period.
Why This Announcement Matters
The decision to waive interest payments could provide much-needed relief to student loan borrowers across the country during a time of growing uncertainty and deepening financial stress. At present, there are an estimated 42.8 million borrowers who owe more than $1.5 trillion in federal student loans. As of the first quarter of 2020, 35.3 million of those borrowers have loans held by government agencies.
Which Loans Qualify for This Waiver
According to the statement by President Trump, only student loans held by federal government agencies would be impacted by this measure. Which includes all federal direct student loans and Stafford loans, but would, in turn, exclude any private student loans including FEEL loans and Perkins loans. This means that it is more important than ever for student borrowers to have a clear understanding of the nature of their loan to know if they qualify for these changes.
How Will the Waiver Take Effect
According to the information released by Secretary DeVos, servicers are expected to retroactively stop assessing interest for a 60-day period starting from March 13, 2020. Borrowers will not be expected or required to apply for relief as part of this measure. Instead, it will be applied automatically to all loans owned by the federal government. While it is also possible to request a period of forbearance to halt all payments for 60 days, the removal of interest presents a great opportunity for many borrowers to make more progress than usual towards fully paying off their debt.
What Will Change in 60 Days?
At present, neither the Education Department or President Trump provided a clear explanation of what will happen in 60 days. The popular perception presently is that these loans will resume regular interest accruement if no additional announcements or changes are made between now and the conclusion of this relief period.
Work with Southwest Recovery Services in Dallas, Texas
As an industry leader in debt collection and revenue management services, everyone on our team is committed to making every possible effort to continue giving our clients the high-quality service they deserve while taking precautions to prevent the continued spread of the Coronavirus in our local communities for the safety of the public, and our employees. This means that we will continue to closely monitor the situation, provides updates to our clients, and make every effort to comply with all applicable rules and regulations.