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What Is Federal Student Loan Interest Waiver & Payment Suspension Mean

Written by Shreya Berry

Shreya has expertise in writing engaging content for the readers and has a deep interest in unique applications of technology in various domains. She has worked closely on projects with Neil Patel Digital, Hindustan Times, News 18 and Shiksha.

December 5, 2020

The US president said the coronavirus pandemic was a global pandemic. In his speech, he said he would suspend interest for the duration of the emergency on student loans held by the federal government. Some doubted whether this was permissible legally, but retroactive to 13 March 2020, the Department of Education said they would try to get it finished.

For the following loans, the specifics of the waiver are:

  • Student Lead Loans
  • Perkins and FFEL loans from the federal government

In the case of a national exemption, interest on your debts will not rise if you have those loans. Your full monthly payment will still be required.

In comparison, debt would not rise if the qualified debts are postponed or forbearance. This provides expert borrowers some unique opportunities.

What does Federal Student Loan Interest Waiver & Payment Suspension really mean?

On average, a student with $25,000 in loan debt normally pays about $60 per month in interest. Now, in accordance with the coronavirus relief bill, students will pay no interest until at least February 2021. Unfortunately for some students, these measures do not apply to private student loans. About 90% of student debt is federal, meaning the suspended payments will impact the monthly statements of the vast majority of student loan borrowers.

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Which education loans are eligible for the interest rate waiver?

It is important to note that not all loans are eligible for Federal Student Loan Interest Waiver & Payment Suspension. The interest waiver is applicable only to federal student loans held by the federal government. Perkins loans and FFEL loans that were issued prior to July 1, 2010, and are still held by private parties are not included. The government is also not covering interest charges for private student loans like those provided by private lenders or  Colleges. Make sure you check  which type of federal loan(s) you have in order to take advantage of the Federal Student Loan Interest Waiver & Payment Suspension. 

Does Federal Student Loan Interest Waiver & Payment Suspension change my required monthly payment on federal student loans?

Yes. All federal student loans that are not in default and FFEL loans owned by the government have all payments automatically suspended through December 31, 2020. However, the same is not applicable to private loans. The CARES Act does not automatically suspend payments on private student loans or Perkins loans and FFEL loans that were issued prior to July 1, 2010, and are still held by private parties.

What to do if I can’t make my payments on loans that aren’t held by the Federal Government?

The best thing you can do if you can’t make my payments on loans that aren’t held by the Federal Government is contact your federal and private loan servicer(s) to discuss your options. Do not ignore the problem. You may be eligible for forbearance or deferment to temporarily put your payments on hold. 

Will the HEROES Act help with Federal Student Loan Interest Waiver & Payment Suspension?

Yes. The HEROES Act was borne out of the need to amend the coronavirus relief bill and offer further financial assistance to college students. Accordingly, Senate Democrats proposed a $3 trillion Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act, which has since been reduced to $2.2 trillion. This Act may be less strident than Senator Elizabeth Warren’s original campaign promise to erase $50,000 per borrower, or Senator Bernie Sanders’ plan to forgive all student loan debt, this proposal aims to cancel $10,000 in debt for “economically distressed borrowers.” 

A slightly pared-down version of this bill was passed by the House of Representatives in October but awaits passage in the Republican-controlled Senate. If passed, the Act has the power to grant relief to private loan borrowers and suspend student loan payments through September 2021 — eight months past the current suspension end date.

What’s more, the HEROES Act would allow adult dependents, many of whom are college students, to receive $500 stimulus checks, which the current coronavirus aid bill does not permit.

Which federal student loans are temporarily set at 0% interest rates?

The following federal student loans are set at 0% interest rates – 

  • Defaulted and non defaulted Direct Loans
  • Defaulted and non defaulted FFEL Program loans
  • Defaulted and non defaulted Federal Perkins Loans
  • Defaulted HEAL loans

However, do note that the aforementioned loans attract 0% interest rates only if they are loans owned by ED. Moreover, some FFEL Program and HEAL loans are owned by commercial lenders, and some Perkins Loans are owned by the institution you attended. These loans are not eligible for this benefit at this time, but you can contact your servicer to ask about what benefits may be available.

In order to find out your Direct and FFEL Program loans are owned by ED, visit here. Once logged in, you will be able to see your StudentAid.gov dashboard. Click on “view details,” and you will be taken to your Aid Summary, where you will see a section called “Loan Breakdown.” In your Loan Breakdown, if you see a servicer name that starts with “DEPT OF ED,” that servicer is for a loan that is owned by ED. This means your federal student loan will be set at 0% interest rate.

Here are some tips to help you with your Federal Student Loan Interest Waiver & Payment Suspension. 

1. To Use a Pay Down Private Student Loan Debt

The first suggestion is for lenders of federal and private loans for students (or this could be any type of private debt, like credit cards). You should take care of your federal loans by contacting your creditor. As abstention is now interest-free, the federal loans will essentially cease for this time span.

Then you can take your entire federal student loan and pay your private student loans or obligations additionally.

That’s nice since there are actually no private lenders providing any sort of funding program. And it is an intelligent step forward in a forthcoming crisis and other financial issues to abolish private student loans and other debts.

When the national emergency ends, you will start payments as usual on your federal loans.

 2. Use A Forbearance And Beef Up Your Emergency Fund

The onset of a crisis and the possibility for work cuts and other financial problems will also help boost your emergency fund. You can follow the same tactic as before – you can abstain from your loans – and save your monthly loan charge. If you care to risk your work due to a pandemic or potential crisis, this will give you a cash cushion.

3. Reassign fees with respect to such high-level loans

Finally, you will take this option to repay fees on the highest balance loans without accruing interest as several student loans are issued. This is extremely useful if you have a compensation schedule based on income and have not made substantial progress on your lending.

Since the highest balance loans increase the most interest, you will make a higher profit on your student loans by making extra principal contributions right now than if you were to pay interest and principal.

You will grant yourself a half-year loan on student loans while the emergency declaration is six months long. It could be a major victory.

4. Your recurring fees for ED-owned loans are suspended

ED has suspended your student loans from ED that began on March 13, 2020, and is expected to expire on December 31, 2020. This means that during this time, you don’t have to make monthly contributions. You will apply for a refund from your loan servicer if you have made a deposit during that period.

It was directed to federal loan servicers to report to credit monitoring agencies as though payments were routinely scheduled after the suspension of payments. The termination of payment shall not be stated for delinquency.

Final Thought

These techniques for Federal Student Loan Interest Waiver & Payment Suspension are for those who prepare their student loans carefully and give priority. You can actually place your debts in order to use the money in your actual budget if you already fail – and that is good, too. However, these techniques for Federal Student Loan Interest Waiver & Payment Suspension will help you win your debt easily, provided you have patience, and you can follow up on your loans.

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