Student Loans in the News: Interest Waiver Amid Coronavirus
A brief round-up of recent articles and blog posts that discuss current student loan debates and data
About the author: Kevin Mahoney, CFP® is a fee-only financial advisor in Washington, D.C. Kevin's work with his clients focuses on paying off student loans, buying a house, investing savings, and budgeting. Kevin is the founder & CEO of Illumint, a virtual financial planning firm specifically designed to help couples and young families with their financial decisions.
Trump’s Student Loan Interest Waiver Isn’t What You May ThinK
New York Times
Author Ron Lieber writes:
"It’s not clear who decided to do things this way and why, or even if any of this was the initial intention of the White House. Establishing an interest-rate waiver that lowered bills would have been enormously complicated: The federal government relies on several outside servicers to bill borrowers and collect their payments, and many have committed errors in recent years.
So there’s a lot we don’t know, and there are many questions the Department of Education could not immediately answer. We’ll get to those, but first, a bit more about what we do know.
The waiver will cover plenty of borrowers. The federal government is the biggest holder of student debt, with $1.2 trillion in direct loans to more than 35 million borrowers.
But it doesn’t apply to every student loan out there. Loans issued through state agencies and others, including from big private lenders like Sallie Mae, are not covered. Other loans that are not part of the waiver program include the majority of Federal Family Education Loans, which are mostly held by commercial lenders, and school-held Perkins loans."
[Read the entire article over at the New York Times]
What to do now that President Trump suspended student loan interest paymentS
Author Alicia Adamczyk writes:
"If you’re still working and your finances have yet to be impacted by recent events, it’s best to keep making payments on time, says Elaine Rubin, senior contributor and communications specialist at Edvisors.
'Waiving interest doesn’t waive the requirement to make your monthly payments — additional guidance or clarification would be needed from the government,' she says.
And if you aren’t facing financial hardship, Rubin says to use the situation to your advantage.
'It may be the time to aggressively attack your student loans,' she says. 'If you aren’t being charged interest, this is an opportunity to make an impact on your student loan balance.'”
[Read the entire article over at CNBC]
Can The President Waive Student Loan Interest?
Author Mark Kantrowitz writes:
"Legally, the U.S. President cannot waive interest on federal student loans, not even in the Direct Loan program. Only Congress can.
But, Congress is likely to support a proposal that temporarily suspends the interest on federal student loans. Senate Democrats called for a six-month suspension of student loan payments.
On Friday, March 13, 2020, President Trump said 'To help our students and their families, I’ve waived interest on all student loans held by federal government agencies, and that will be until further notice.' This announcement was made during an appearance in the Rose Garden where the President declared a national emergency.
He actually can’t do that. Or can he?
Understanding the limits of the President’s authority to pause interest and payments on federal student loans involves a deep dive into the statutory language of the Higher Education Act of 1965."
[Read the entire article over at Forbes]