The department will take a relatively broad interpretation of Trump’s directive, effectively extending the student loan benefits provided under the CARES Act until the end of the year. That relief was set to expire on Sept. 30, just weeks before the presidential election.
DeVos’ department said it plans to continue the automatic suspension of monthly payments on all federally held student loans and will keep the interest rate on those loans set to zero through Dec. 31. Borrowers will have the option to make payments if they choose, and the suspended payments will continue to count toward a borrower’s progress in the Public Service Loan Forgiveness program, as well as other federal loan forgiveness programs.
Department officials also plan to extend the CARES Act’s pause on collecting defaulted federal student loans until the end of the year. They will not seek to seize wages, tax refunds or Social Security benefits of people who are in default on their federally held student loans.
Department officials wrote in their statement on Friday that “any borrower with defaulted federally held loans whose employer continues to garnish their wages will receive a refund of those garnishments” during the extended relief period.
The Education Department has previously been sued over its inability to fully stop garnishing the wages of thousands of borrowers during the pandemic. Officials have blamed employers for continuing to garnish wages in spite of the department’s directive to stop doing so.
Trump’s student loan relief will apply to roughly 40 million federal student loan borrowers. But as many as 9 million borrowers will continue to be excluded from the relief because the CARES Act and Trump’s executive action does not apply to federally backed student loans that are held by private lenders or their college.
Both Republicans and Democrats in Congress have said they want to expand the relief to all types of federal student loans. But the issue has been caught up in stalled negotiations over the next coronavirus relief package.
While critics have questioned the legality and benefits of Trump’s other executive actions to extend unemployment payments and defer payroll taxes, the effect of the student loan policy is more clear cut as it moves ahead at the Education Department.
“Thanks to President Trump’s leadership, students can continue their education and borrowers can enjoy relief from some of the financial stress many may be facing due to the coronavirus pandemic,” DeVos said in a statement Friday. “We want everyone to be focused on a safe return to full-time learning. The President and I will continue to support the success of all students.”
DeVos’ department said it would be working with the loan servicing companies it hires, to notify borrowers about the extension of student loan relief. The department did not immediately provide a copy of the instructions it had sent to its loan servicers.
Back in March, Trump initially moved to use executive action to suspend interest on most federal student loans as the country first began locking down. DeVos also used her own powers to order a temporary halt to the collection of defaulted federal loans. Congress soon codified those benefits into the CARES Act and also went a step further in suspending most monthly student loan payments for roughly six months.