Student-Loan Payment Extension: Who's Eligible?
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What does the executive order propose for extending student-loan payment suspensions?
Future Money Briefing for Monday, August 17th. I'm J.R. Whelan for The Wall Street Journal. Student loan borrowers facing hard times because of the pandemic have been able to suspend their loan payments since April. And an executive order signed by President Trump earlier this month would extend the grace period through the end of the year. But it's not that simple.
It's premised on a provision within the law that enables people to apply for relief from making payments due to economic hardship. Right now, we don't know whether people are going to have to do something or whether it's going to be automatic.
Our personal finance reporter Ann Turgason will answer some important questions about the order, like who'd be eligible and why you might want to suspend your payments even if you're able to pay. That's after the break.
Suspending student loan payments can free up some much-needed cash, but a plan to let borrowers put payments on hold through the end of the year has raised a lot of questions. Let's bring in our personal finance reporter Ann Tergesen to clear some things up. So first of all, Ann, the executive order signed earlier this month, it stirred up some debate over whether President Trump has the legal authority to extend the relief. But borrowers just want to know, what's this going to do to my bank account? Is the relief likely to go through?
Does the president have legal authority to extend relief without Congress?
Well, so there's a lot of moving parts here. But basically, if Congress ends up passing a coronavirus relief package, which even though they left on vacation and didn't come to an agreement, a lot of people still feel like there's a chance that that may happen. So if Congress does that, then some student loan relief is very likely to be in that package. There's broad bipartisan support for continuing student loan payment relief. So the question, though, is if Congress doesn't act and put in a relief package, a continued relief package, then this executive order would fail.
Will borrowers need to apply or will payment extensions be automatic?
stand, I think. You know, there are some who believe that President Trump doesn't have the authority to do it, but the White House citing, you know, a clause in the Higher Education Act says that they do have the right to do it. But more to the point, because there is broad bipartisan agreement and support for continued student loan payment relief, There's really nobody who's going to file a lawsuit, you know, to the administration. You can't do this. We don't want you to do this. In fact, you know, I think I think it's quite likely that there will be some kind of continued student loan relief, whether it's due to this executive action or congressional action.
OK, so assuming it all goes through, do borrowers have to do anything to have their payment relief extended?
Which types of student loans are eligible for the extended suspension?
Well, so here's the problem with the executive action is that it's premised on a provision within the law that enables people to apply for relief from making payments due to economic hardship. Right now, we don't know whether people are going to have to do something or whether it's going to be automatic payment. People in the industry are, you know, quite optimistic that it's going to be an automatic thing and that people who are currently, you know, receiving suspended payments, the right to suspend their payments are just going to automatically continue in that course. But we won't know until we get some kind of guidance from the Department of Education.
So what kinds of loans are eligible for the extended relief?
So federal loans that are owned by the Department of Education are eligible. And that has been the case going back to March. That's when we first saw Congress act and suspend student loan payment obligations. So it's always been federal loans that are owned by the Department of Education. That happens to be a huge majority of the federal loan markets. So unless you have old loans that were made under a program that was discontinued in 2010, you can be pretty sure that your loans are included.
Okay.
Who might be excluded or face special rules under the executive action?
And are there types of loans that are not eligible?
It gets a little complicated.
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Chapters
6 chapters
1
What does the executive order propose for extending student-loan payment suspensions?
0:05–1:23
2
Does the president have legal authority to extend relief without Congress?
1:23–2:03
3
Will borrowers need to apply or will payment extensions be automatic?
2:03–2:46
4
Which types of student loans are eligible for the extended suspension?
2:46–4:01
5
Who might be excluded or face special rules under the executive action?
4:01–5:05
6
Should borrowers pay during the suspension and how are forgiveness programs affected?
5:05–7:37
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