In response of the coronavirus, U.S. President Donald Trump has just waived interest on all student loans.
“I am announcing the following emergency actions today: to help our students and their families, I’ve waived interest on all student loans held by federal government agencies and that will be until further notice,” he said during a press conference on Friday.
Experts reacted quickly, and they were divided on the announcement.
“Dealing with interest is an important start and I’m glad they recognized the need for action to help borrowers,” Ben Miller, vice president for postsecondary education at the Center for American Progress, told Yahoo Finance. “But they need to do more to make it easier for borrowers to pause payments, automatically prevent individuals from going delinquent, and immediately stop the seizure of tax refunds, social security, and wages for defaulted loans.”
To be clear, Trump has not yet elaborated on how exactly this will take place, and whether this is automatic and just for federal student debt, which one expert alluded to.
“We support anything that can help ease the challenges students are facing, including relief on their student loans,” NASFAA President and CEO Justin Draeger said in a statement. “At this time, we don’t have details on what exactly this policy change means for borrowers.”
Waiving student loan interest at this time of crisis is a fine gesture, but I’m skeptical that it will provide much relief. It’s also unclear exactly what this will mean for borrowers.
— Beth Akers (@DrBethAkers) March 13, 2020
But others have called for more than just waiving the interest on student loans.
Rohit Chopra at the Federal Trade Commission, for one, has called for an outright cancellation of student debt payments.
Student loan borrowers got slammed in the last recession. Even with deferment and forbearance options, millions were forced into default, destroying their financial futures.
Canceling student debt payments, not just delaying them, must be on the table. https://t.co/8Gq3POji2Y
— Rohit Chopra (@chopraftc) March 13, 2020
“The Coronavirus crisis is an economic disaster for Americans with student loan debt who are already on financial thin ice,” Natalia Abrams, executive director of Student Debt Crisis, said in a statement. “Millions of people will need all of their income and savings to weather the financial harm that is to come; families cannot afford to send money to the government for their student loans. We are calling on Congress and Betsy DeVos’ Department of Education to do what is morally right by canceling student loan debt in response to this health crisis.”
Former Federal Student Aid COO A. Wayne Johnson echoed that sentiment.
Noting that waiving interest “basically does nothing to improve personal cash flows,” he added that his “specific recommendation to the President and the Congress… is that this is the moment to go ahead and effect cancellation of up to $50,000 of debt.”
He added that doing so right now would provide a huge economic stimulus.
In the meantime, Democratic lawmakers have introduced a bill that proposes to ensure that if students withdraw from college during this time, they would not be forced to repay their loans from this semester, among other provisions.
Aarthi Swaminathan is a reporter for Yahoo Finance. Follow her on Twitter at @aarthiswami.