ED Clarifies Details of Interest Accrual Pause, Allows Temporary Administrative Forbearance

By Owen Daugherty and Joelle Fredman, NASFAA Staff Reporters

The Department of Education (ED) on Friday further clarified the method by which borrowers with federally-held student loans will receive a pause on interest accrual, how long the delay will last, and what options borrowers have to pause payments — which otherwise would not be lowered by the pause in interest accrual alone. 

In a press release, Education Secretary Betsy DeVos announced all borrowers with qualifying loans would automatically have their interest rate set to 0% for at least 60 days from March 13, 2020, and added that they would be able to halt payments on their loans for at least two months by requesting an administrative forbearance through their loan servicer. Borrowers that choose to forgo asking for an administrative forbearance would not see a reduction in monthly payments. Rather, the full payment would be applied toward the principal balance of the loan.

In addition, DeVos debuted plans for immediate support for delinquent borrowers, announcing ED authorized a temporary automatic suspension for loan payments of those who are more than 31 days delinquent on their loans as of March 13, 2020 — the date on which the forbearance would set to have begun if the borrower requested one — or those who become more than one month delinquent. 

“These are anxious times, particularly for students and families whose educations, careers, and lives have been disrupted,” DeVos said in the release. “Right now, everyone should be focused on staying safe and healthy, not worrying about their student loan balance growing. I commend President Trump for his quick action on this issue, and I hope it provides meaningful help and peace of mind to those in need.”

Trump announced last Friday during a press conference in which he declared a national emergency due to the COVID-19 outbreak that he would be pausing the interest on federal loans to support impacted student borrowers. However, consumer advocates and many within the higher education community quickly responded with questions over the method by which the pause would be implemented and how it would impact borrowers in the long-term, such as whether that waived interest will be tacked back onto loans after the waiver is lifted.

Meanwhile, Republicans and Democrats in the Senate are debating their own proposals to provide student debt relief during the coronavirus outbreak. Republicans late on Thursday introduced a bill that would suspend monthly payments and interest accrual on student loans for up to six months, while Democrats proposed suspending payments for the duration of the national emergency and ensuring every borrower receives a minimum of $10,000 in relief.

Sen. Elizabeth Warren (D-Mass.), who sits on the Senate education committee, quickly responded to ED’s clarification, saying it “still isn't good enough” and calling on ED to do more than pause payments.



“The federal government should cancel at least $10,000 for all student borrowers to help families & our economy,” she wrote on Twitter, echoing the proposal she helped introduce this week.

Some have urged the federal government to allow the months in which borrowers’ payments were paused to count as progress toward their total payments in loan forgiveness programs. In a Q&A section on the Office of Federal Student Aid’s (FSA) web page dedicated to COVID-19, it informs borrowers that if they “don’t make a payment for a month, or enter a deferment or forbearance because you cannot afford your payment, that month will not count toward [Public Service Loan Forgiveness [PSLF].”

NASFAA, alongside the Institute for College Access and Success (TICAS) and the American Council on Education (ACE), sent a letter to House and Senate leaders Friday asking them to place all federal student loan borrowers — both those delinquent on their loans and those currently in repayment — into automatic, interest-free forbearance, and also urged Congress to ensure those months continue to count toward loan forgiveness. 

“Ideally, this should be done in a way that ensures a smooth re-entry into repayment for borrowers when the crisis has abated and the time to resume payments begins,” the groups added.

Some student advocacy groups were also quick to share concerns that loan servicers may not be prepared to handle the influx of requests from borrowers seeking administrative forbearance, especially as student loan companies face limited resources and staff are working remotely. 

In fact, FedLoan Servicing, which handles PSLF requests, currently has a warning on its website that it has limited staff working at its call centers and that borrowers may experience delays in reaching customer service representatives. The loan servicer added that it is awaiting further guidance from ED following Trump’s announcement about waived interest fees.

Alexis Goldstein, a senior policy analyst at Americans for Financial Reform, wrote in a statement that the “minor tweaks” issued by ED “are insufficient and fail to address the crisis.”

“This comes at a time when many student loan servicers are closing call centers or reducing hours, and will in fact be a serious barrier to borrowers under pressure getting the relief they desperately need,” she added. “In addition, it leaves out some federal student loan borrowers whose loans are not federally held.”

Stay up to date on the latest developments with the new coronavirus outbreak and its impact on federal student aid by visiting NASFAA’s COVID-19 Web Center.

 

Publication Date: 3/20/2020


Robert F | 3/23/2020 1:8:20 PM

I like the tweets. They add value and clarity to questions that have not been answered in the press releases. Please keep them coming.

Ean F | 3/23/2020 11:4:56 AM

I agree with the other comments. Please refrain from this if possible.

Gina R | 3/23/2020 10:12:38 AM

I agree with other commenters - our focus should be on sustaining our institutions and students during the extraordinary time. Political opinion is a distraction and does nothing to help move us forward.

Robert W | 3/23/2020 9:56:10 AM

I see no positive purpose in including personal opinion tweets in NASFAA columns. I do applaud NASFAA's efforts to work with other organizations to help draft better regulations and laws. I am sure NASFAA has suggested student borrowers be able to do this on line with their servicer if ED has not thought of this.

Bob Walker
Tupelo, MS

Bonnie C | 3/23/2020 9:29:04 AM

I would rather not see political tweets in the middle of the article! I want to print the article, not the biased tweets.

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