But it didn’t go as far as what some Democrats had proposed – a suspension of monthly loan payments or a loan forgiveness.
The department was considering asking loan officers to lower the interest rate on federal loans to zero percent, according to people familiar with the plan.
Under this approach, a borrower’s monthly payment amount would not automatically change, although any payment made by the borrower would likely pay off a larger portion of the principal balance.
Education Secretary Betsy DeVos “is proud to work with the President to take decisive action to help students and parents during this national emergency,” department spokeswoman Liz Hill said in a statement. communicated.
The new policy will be implemented by the Education Ministry, which scrambled on Friday to issue instructions and advice to companies it hires to handle monthly borrower payments. A ministry official said the interest waiver would automatically be applied to all borrowers, effective Friday, although it may take another week to fully “operationalize” the policy.
It’s unclear how much money the interest waiver will save borrowers, but it could add up to billions of dollars, depending on how long the Trump administration keeps the policy in place. In fiscal 2019 alone, the Education Department said it charged more than $ 100 billion in interest on all federal student loans.
Federal student loans already provide borrowers with the flexibility to defer payments in certain circumstances, including economic hardship, although interest may continue to accrue. Trump’s suspension of interest payments, combined with these existing benefits, could mean some Americans could suspend their interest-free student loans.
Democrats and consumer groups who have long called for sweeping federal student debt relief have said in recent days that the coronavirus pandemic has only exacerbated the need to help Americans grappling with it. their monthly loan repayments.
Senator Elizabeth Warren (D-Mass.) Said in a Tweeter that Trump’s action was “not enough” to help student borrowers. “Donald Trump and @BetsyDeVosED must cancel student loans, not just waive interest or suspend payments,” she said. “Suspending payments or interest only delays the pain.”
However, Senator Jeanne Shaheen (DN.H.) tweeted that this was a “good step” and that “With so much uncertainty in the economy, we must continue to consider all available means to bring relief “.
Senate Democrats earlier this week included a six-month moratorium on some federal student loan payments on their list of items they would like to see in an economic bailout legislative package. The National Consumer Law Center, which represents low-income student loan borrowers, also called for a moratorium on student loan repayments.
Earlier today, Treasury Secretary Steve Mnuchin said the suspension of student loan payments was on the “50 different list” that Trump’s advisers were planning to present to him to support the economy and the markets. financial due to the coronavirus pandemic.
“It will be something that we will look at,” Mnuchin said in an interview on CNBC. “We have a lot of authority,” Mnuchin said, adding that on “the things for which we have no authority, we will be working with the House and the Senate on a bipartite basis. I can assure you that the president is a question of action, of action, of action. ”
Representative Alexandria Ocasio-Cortez (DN.Y.), who called for a blanket forgiveness of student loans, tweeted earlier today that she was “grateful” that the Trump administration “is taking the suspension of student loans seriously. student loan payments “. She called it “a decisive decision that will help stabilize millions of people. We have to do it now. There is still a lot to be done, but every step counts.”