President Trump has announced that government agencies will waive interest on federal student loans until further notice to provide financial relief amid the COVID-19 outbreak. A Department of Education spokesperson told CNN that “any borrower with a federal loan—including those in income-driven repayment and in forbearance—will have interest waived until the temporary policy ends.” The unprecedented waiver will be applied automatically, apply retroactively to the March 13 announcement date, and remain in place for an undetermined amount of time.
Interest rates on federal student loans have averaged 5.5 percent during the past 10 years, and monthly student loan bills have averaged $400, reports CNBC. The waiver applies to direct, Family Federal Education, Perkins, Parent Plus, and Grad Plus loans. Nine different lending companies are awaiting further guidance from the Department of Education on how to implement this policy.
Consumer groups call for halting, recalculating loan payments
While applauding the interest waiver as a welcome start, consumer advocacy groups are pushing for Trump to enact further relief measures. “Simply waiving interest is not actually going to change the day-to-day responsibilities [people face], from what they have to pay to what their actual balance looks like over the course of this crisis,” Ashley Harrington, senior policy counsel at the Center for Responsible Lending, told Yahoo Finance. “We really need to think beyond just waiving of interest,” to “actual cancelation of student loan debt.”
Persis Yu, the director of the Student Loan Borrower Assistance Project at the National Consumer Law Center, said that federal relief would help debtors prioritize physical wellbeing. “Borrowers should not be worrying about their student loan payments at a time when they should be focused on the health and safety of their families and communities,” she said in a statement.
“No one should fall behind on their student debts because of this national crisis,” James Kvaal, president of the Institute for College Access and Success, told Inside Higher Ed. “Fully pausing student loan payments in addition to halting interest accumulation, and stopping punitive student loan collections, would provide much-needed, immediate relief to those individuals who may be unable to work and are facing economic hardship during this time of uncertainty.”
Congressional Democrats propose legislation offering aid for students, colleges
Democrats in the House of Representatives and Senate have proposed bills that would “provide a temporary exemption for students from repaying Pell Grants or student loans if their terms are disrupted,” Inside Higher Ed reports. Currently, if their school closes or if they withdraw from school, Pell Grant recipients are required to return part of their grant to the federal government.
The Supporting Students in Response to Coronavirus Act, sponsored by Senator Patty Murray (D-Wash.), would provide $1.2 billion in emergency financial aid during the disruption to help cover college students’ food, housing, health care, and childcare needs. The bill would provide another $1.2 billion for primary and secondary school districts, as well as colleges and universities, as they plan for closures, provide meals to students, clean and sanitize educational facilities, and train educators and other staff members on how to ensure buildings are safe and ready for student re-entry.
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