Fed allows student loan borrowers to suspend payments
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Federal student loan borrowers will be allowed to suspend payment for at least two months during the coronavirus emergency, under a new directive. And the interest rates on these loans have been set at 0% for at least 60 days.
But the order, announced Friday by the US Department of Education, does not apply to private loans, including those held by public authorities responsible for student loans. The Vermont Student Assistance Corp. said it is not currently implementing similar COVID-19 debt relief measures for its own borrowers.
“We grant our loans through the bond market. There would therefore be a number of steps to be taken to change the conditions. We’ll have to get permission, ”VSAC spokesperson Sabina Haskell said.
Haskell pointed out, however, that the non-profit agency has policies in place to give debtors a break from tough times. The VSAC will put borrowers facing economic hardship on hold for up to two years, she said, essentially allowing someone to skip the payment during that time.
Vermonters financially affected by the pandemic are encouraged to call the agency at 800-642-3177 for loan advice.
“We work with our borrowers,” Haskell said.
For Joshua Cohen, a Dover-based student loan lawyer, neither what the federal government nor the VSAC offer is particularly generous. He notes that the US Department of Education’s announcement only applies to student loans held by the federal government, which excludes the majority of Federal loans for family education. And that’s much less than what the department has done after previous national disasters, including Hurricane Katrina.
“Everything froze. No regular payment was due, no rehabilitation payment was due, no garnishment was authorized. No debt collection was allowed – a debt collector couldn’t even call you if you lived in New Orleans, ”he said.
And VSAC’s existing policies will not help borrowers affected by the coronavirus outbreak if they have already used up their two years of forbearance, Cohen said. It also won’t help those who are already facing debt collection.
“People need every penny they can get,” he said.
At least one of VSAC’s peers has announced its own limited debt relief measures related to the coronavirus outbreak. The Rhode Island Student Loan Authority announced on Friday that non-federal student loan borrowers whose incomes have been severely affected can apply online to suspend two months of payment, even if the interest will continue to run.
Congress is also debating further student loan debt relief as part of its coronavirus stimulus package. Senate Republicans want to suspend federal student loan payments for three to six months, with no accrued interest. Democrats, meanwhile, are pushing for a much more generous proposal: a minimum six-month remission of payments and a minimum of $ 10,000 debt cancellation.
Haskell said VSAC, alongside its counterpart agencies in other states, is more closely aligned with the Democratic proposal.
“Zero interest is not as good as asking the federal government to make the payments for you,” she said.
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