The department will take a relatively broad interpretation of Trump’s directive, effectively extending the benefits of student loans provided under the CARES law until the end of the year. That relief was set to expire on September 30, just weeks before the presidential election.
DeVos’ department said it plans to continue the automatic suspension of monthly payments on all student loans held federally and will keep the interest rate on those loans set at zero until December 31. Lenders will have the option to make payments make as they choose, and the delayed payments will continue to account for the advancement of a loan in the public loan forgiveness program for loans, as well as other federal loan forgiveness programs.
Department officials also plan to extend the break from the CARES law when collecting failed federal student loans until the end of the year. They will not attempt to seize wages, tax credits or social security benefits from people who are in default on their federal student loans.
Department officials wrote in their statement on Friday that “any lender with failed federal loans whose employer continues with their paycheck will receive a refund of those guarantees” during the extended period of relief.
The Department of Education has previously been sued over its inability to completely stop the payroll of thousands of lenders during the pandemic. Officials have blamed employers for continuing to pay despite the department’s directive to stop this.
Trump’s relief for student loans will apply to about 40 million federal student loans. But at least 9 million lenders will continue to be excluded from the relief because the CARES Act and Trump’s executive action do not apply to federally supported student loans held by private lenders like their college.
Both Republicans and Democrats in Congress have said they want to extend the relief to all types of federal student loans. But the problem has been raised in stagnant negotiations over the next package for coronavirus relief.
While critics question the legitimacy and benefits of Trump’s other executive actions to extend unemployment benefits and expand payroll taxes, the effect of student loan policies is more clearly cut as it progresses in the Department of Education.
“Thanks to the leadership of President Trump, students can continue their education and lenders can enjoy relief from some of the financial stress that many may suffer from the coronavirus pandemic,” DeVos said in a statement Friday. “We want everyone to focus on a safe return to full learning. The President and I will continue to support the success of all students.”
DeVos’ department said it would work with the lending service companies it hires to inform lenders about extending student loan relief. The department did not immediately provide a copy of the instructions it had sent to its lenders.
Back in March, Trump initially moved to use executive action to lock up interest rates on most federal student loans since the country first began writing. DeVos also used its own powers to order a temporary halt to the collection of failed federal loans. Congress soon codified these benefits in the CARES Act and also went a step further in suspending most monthly student loan payments for about six months.
