During a press conference on the administration’s steps to address the COVID-19 outbreak and related economic fallout, President Trump announced on Friday a pause on interest charges for all federally-held student loans. What does this mean for folks with current student loan debt?
- Keep making your payments if you can. If you are in a financial position to keep making your payments on federal student loans, you can and should keep doing so. The main effect for you will be that more of your payment will go toward paying down the principal, which will ultimately reduce your overall time to paying off your debt.
- Interest won’t accrue during forbearance. If you are not able to keep up with your payments because of lost income, your loan service provider should have a straightforward process, either online or by calling, to apply for a forbearance period of several months. During that time, you won’t be penalized for not making a payment, and unlike under normal circumstances, you won’t have interest piling on top of your debt while to gain more solid financial footing.
- You can apply for income-driven repayment to reduce your monthly payment amount. Applying for income-driven repayment can be confusing for many borrowers. Consult resources from your loan service provider to determine what might be best for you. One resource that may help is the emergency student loan aid application tool developed by Student Debt Crisis and Savi. The tool is available starting March 17 at http://emergency.bysavi.com/.
- There is advocacy work still to do. Pausing student loan interest will most likely have a long-term benefit by reducing the amount of time borrowers need to pay off their loans. But it is unlikely to have much benefit for the present or near-term, when many people need more cash on hand to pay for basic needs like housing and food. We will continue calling for a suspension of loan payments overall, while also encouraging Congress to pass measures that protect Pell grant funds for students whose institutions have shut down because of COVID-19 and provide them with access to funds that can meet their present needs.
Continue checking our blog and social media channels for updates and links to resources designed to help young people navigate this challenging time.