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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 interest rates on such loans have been set at 0% for at least 60 days.
But the order, announced Friday by the U.S. Department of Education, does not apply to private loans, including those held by state student loan authorities. The Vermont Student Assistance Corp. says it is not currently enacting similar COVID-19 debt relief measures for its own borrowers.
“We make our loans through the bond market. So there would be a number of steps that we would need to go through to change the conditions. We’d have to get permission,” VSAC spokesperson Sabina Haskell said.
Haskell did stress, however, that the nonprofit agency does have policies in place to give debtors a break in difficult times. VSAC will put borrowers experiencing economic hardship in forbearance for up to two years, she said, which essentially allows someone to skip payment for that period of time.
Vermonters impacted financially by the pandemic are encouraged to call the agency at 800-642-3177 for loan counseling.
“We work with our borrowers,” Haskell said.
For Joshua Cohen, a Dover-based attorney who specializes in student loans, neither what the federal government nor VSAC are offering is particularly generous. He notes that the U.S. Department of Education’s announcement only applies to federally held student loans, which excludes the majority of Federal Family Education Loans. And it’s much less than what the department did after previous national disasters, including Hurricane Katrina.
“Everything froze. No regular payments were due, no rehabilitation payments were due, no garnishment was allowed. 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 won’t help borrowers impacted by the coronavirus epidemic if they’ve already used up their two years of forbearance, Cohen said. Nor will it help those 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 tied to the coronavirus epidemic. The Rhode Island Student Loan Authority announced Friday that non-federal education loan borrowers who have had their income severely impacted can apply online to suspend two months of payments, although interest will continue to accrue.
Congress is also debating further student loan debt relief as part of its coronavirus economic stimulus package. Senate Republicans want to suspend payments on federal student loans for three to six months, with no interest accruing. Democrats, meanwhile, are pushing for a far more generous proposal: forgiveness for at least six months of payments, and a minimum of $10,000 in debt cancellation.
Haskell said VSAC, alongside its peer agencies in other states, is more closely aligned with the Democratic proposal.
“Zero interest is not as good a deal as getting the federal government to make the payments for you,” she said.
