Update 03/26/2020: This article has been updated to reflect the student loan provisions in the Senate Coronavirus Relief Bill passed Wednesday evening.
Student loan borrowers will be able to suspend payment of their federal student loans without penalty for the next six months, under the coronavirus stimulus bill adopted by the Senate on Wednesday evening.
It comes after the Education Department announced that borrowers could withhold payments for at least 60 days if they requested forbearance.
The big change from the original DOE announcement, besides the length of time loans can be deferred, is that payments will automatically be suspended for six months. Borrowers don’t have to do anything to take advantage of this break. During this time, no interest will accumulate.
In addition, the collection of overdue debts will be suspended.
This provision has been put in place to provide some relief to the millions of Americans who have had their hours reduced or have been made redundant as a result of the coronavirus pandemic. Suspension of federal student loan payments may help free up money for other invoices or financial obligations.
“It’s the right thing to do if people are struggling to make ends meet,” said Michael Bloch, CEO and founder of Pillar, a personal finance app. CNBC do it.
If you want more information, you can call 1-800-4-FED-AID to speak to your repairer, or go This site for more information.
Typically, suspending payments is more expensive for the long-term borrower as interest continues to accumulate and is added to the loan principal balance. But now borrowers will get a few months of relief without earning more interest.
Borrowers will still be able to make payments during this period, and if you can still you should, says Bloch.
“All federal student loans temporarily accumulate 0% interest,” he says. “This means that the borrower’s payments will do more to reduce the principal and get them out of debt faster.”
And this does not apply to private student loans. If you have private loans and are having difficulty, you should also contact your service agent and see if they can provide relief. Otherwise, you will need to make payments as usual.
However, in another change from previous relief measures, the suspension of payments would apparently not hinder someone requesting a civil service loan forgiveness. They can suspend payments for six months and have their loans canceled after 10 years if they go through the rest of the PSLF guidelines.
“I encourage every borrower to take a close look at their budget and see what makes the most sense for them,” says Bloch.
The bill has been sent to the House for a vote.