After stimulus bill negotiations hit a stalemate, Donald Trump signed some executive orders on a few important issues. One of those was related to student loan payments. Now, there is a chance the executive order could ruin some borrower's chance for debt forgiveness.
The order extends an interest-free pause on federal student loan payments for the remainder of 2020. However, Yahoo Finance reports that Ben Miller — vice president for postsecondary education at the Center for American Progress — told the House Education and Labor Committee that this could lead to some big problems. "There's little chance the economy will be in strong shape by then," Miller stated. "Having roughly 26 million borrowers all enter repayment during the holidays — it’s an implementation disaster in the making." He offered him a different plan, however, suggesting "an approach that pauses payments for a full year and ties interest restarting to positive economic indicators would be much better."
If you have student loans owned by the U.S. Department of Education, we’re happy to share that the administrative forbearance and 0% interest rate have been extended to provide relief during the COVID-19 emergency. Learn more: https://t.co/6liqmT452W pic.twitter.com/limH2I66Yb— Federal Student Aid (@FAFSA) August 19, 2020
Will Sealy, co-founder and CEO of student loan startup Summer, told Yahoo Finance that he has encounter many loan recipients having problems with their servicer counting the non-payments toward the loan forgiveness program. "FedLoan Servicing has told borrowers they will not count payments until the forbearance is over," Sealy said. "This could delay that backlog and cause significant processing errors and delays this upcoming January."
According to the federal student aid website, "On Aug. 8, 2020, President Trump directed the Secretary to continue to suspend loan payments, stop collections, and waive interest on ED-held student loans until Dec. 31, 2020." The page also answers questions such as "What if my campus has closed due to the coronavirus? Will I be able to finish the term and keep my federal student aid?" and "My parents can't go to their jobs because of the coronavirus, and they don’t get paid if they don’t work. Their unemployment means my financial need has increased. Can I get more financial aid?"
In a statement on Wednesday, the White House stated: "While Nancy Pelosi and her colleagues went home, [President Donald Trump] remained hard at work — taking executive action to stop evictions, provide unemployment insurance, pause student loan payments, and cut the payroll tax." This was in response to the stimulus bill negotiation breakdown that transpired between Speaker Pelosi, Senate Minority Leader Chuck Schumer, and the Trump administration. Trump went on to sign executive orders on unemployment and evictions, as well.