Americans collectively hold a staggering $1.6 trillion in student loan debt, and only half were paying it down -- before the coronavirus crisis and recession hit.
In what is surely welcome news for borrowers nationwide, many will be getting a break on those balances.
The U.S. Department of Education, which oversees federally-backed student loans, says it is suspending all payment requirements through September 30, retroactive to March 13. It's also halted collections efforts on loans that were in or near default.
The Education Department says the entire process is automatic -- borrowers won't need to do anything. If you have auto-pay set up for your loan, you won't be billed before October. And, no interest will be charged during that time.
With the typical student loan payment being between $200 and $300 per month, according to the Federal Reserve, that extra money could make a big difference for borrowers who recently lost their job. If that includes you, the Department of Education is offering a refund on your March loan payment, through a request for "administrative forbearance" through your loan servicer.
If you're still able to make payments, and you want to take advantage of the 0% interest period, the Department of Education encourages you to do so. "Contact your loan servicer or visit your servicer’s website to make a payment or to find out how you can continue or start auto-debit payments," it said in a FAQ post on its website. "Continuing to make payments during the administrative forbearance could help you pay down your loan balance more quickly because the full amount of a payment will be applied to principal once all interest accrued prior to March 13, 2020, is paid."
If you have private student loans, the actions by the Department of Education don't apply. Contact your lender to ask for help if you find yourself unable to make payments because of a virus-related job loss.
The Education Department has created a detailed information page on its website for student loan borrowers with further questions.