U.S. Department of Education Clarifies Trump’s Order on Student Loans

The U.S. Education Department will effectively extend CARES Act protections for federal student loan borrowers until the end of the year.

By , Attorney

Update: On his first day in office, President Joe Biden issued 17 executive orders, presidential memoranda, and agency directives. One of those directives instructed the U.S. Department of Education to extend the existing payment suspension and interest waiver for most federal student loans through at least September 30, 2021. (The federal Coronavirus Aid, Relief, and Economic Security (CARES) Act initially set up this student loan payment suspension.) In response, the Education Department announced that it would continue the pause on federal student loan payments and collection actions at President Biden's request and keep borrowers' interest rate at 0%.

U.S. Secretary of Education Betsy DeVos has announced that the Department of Education will fully implement the president's executive memorandum on student loans by automatically pausing payments for federally-backed student loans and reducing interest rates to 0% until the end of the year. The Department also said it is continuing its policy of halting collections on defaulted federally-held student debt, stopping wage garnishments, and discontinuing the seizure of tax refunds and Social Security benefits. (According to a class-action lawsuit, though, tax refund seizures and garnishments are allegedly still happening.)

The non-payments during the suspension will still count toward Public Service Loan Forgiveness and other loan forgiveness programs, like income-driven repayment plans. They'll also count toward loan rehabilitation, a federal program that eliminates a default from a borrower's credit report after making nine payments during a period of 10 consecutive months.

The Education Department's announcement cleared up many of the unanswered questions that arose following the president's executive action by essentially verifying that it will continue the protections that Congress gave to federal student loan borrowers under the federal Coronavirus Aid, Relief, and Economic Security (CARES) Act. That relief was set to expire on September 30, just weeks before the upcoming presidential election. This student loan relief extends the CARES Act protections from September 30, 2020, through December 31, 2020.

Still, private student loan borrowers don't get relief under the extension. If you have private student loans, call your lender to find out if any alternatives are available to help you out during the coronavirus crisis. Also, if you have private student loans (or federal student loans not covered by the CARES Act protections), several states, like California, Colorado, Connecticut, Illinois, Massachusetts, New Jersey, Vermont, Virginia, Washington, and New York, as well as the District of Columbia, have reached agreements with servicers to help borrowers.

Effective date: August 21, 2020