DeVos is suspending student loan payments until January
(AP) – The Trump administration on Friday put all federal student loan payments on hold until the end of January and kept interest rates at 0%, extending a moratorium that started at the beginning of the pandemic but should expire later this month.
By extending payments by a month, the administration leaves it to the Biden administration or Congress to decide whether to take longer term relief for millions of borrowers. The measure was included in an aid package for March and extended by the White House in August, but its fate was in doubt as a new aid program stalled.
On announcing the extension, Education Minister Betsy DeVos reprimanded Congress for failing to act. “The extra time also allows Congress to do its job and determine what action it deems necessary and appropriate,” DeVos said in a statement. “Congress, not the executive, is responsible for student credit policy.”
As part of the measure, students do not have to make any payments, their loans do not earn interest and all debt collection activities will cease until the end of January.
DeVos was commended for using her powers to halt federal student loan payments in March. Congress later cemented the measure into legislation and Trump extended it to December, but the impending deadline raised fears that millions of borrowers would be forced to resume payments even if unemployment rates rose.
Last month, the American Council on Education and dozens of other college associations urged DeVos to extend the relief. The recent surge in COVID-19 cases would likely add even more economic turmoil.
“Getting millions of Americans back into repayment in the midst of this crisis will create additional financial hardship, forcing borrowers to make difficult decisions about their limited resources,” the groups wrote in a letter to DeVos.
Even DeVos’ own agency warned of impending problems if the moratorium expired. In its annual report last month, Federal Student Aid, the bureau that oversees student loans, said that without renewal, it would be a “heavy burden” to force millions of borrowers into active repayment at the same time.
President-elect Joe Biden did not address the moratorium directly, but instead called for immediate relief on Tuesday, including “easing of rent and student loans”. He has also supported proposals to cut up to $ 10,000 in student debt for all borrowers as part of a future virus relief package.
In Friday’s announcement, DeVos said her agency was working to notify the loan service providers that Education has signed collections management contracts with. A Federal lawsuit Filed against DeVos in April, it was alleged that thousands of overdue borrowers are still receiving a withheld payment despite the mortarium. The Department blamed the mistake on his servicers.
According to the DeVos release on Friday, all defaulted borrowers who continue to have wages withheld will receive refunds.
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