Borrowers stressing about the end to forbearance programs for federal student loans in September just got a reprieve. President Donald Trump signed an executive order on Saturday to extend the break on federal student loan payments. The new order—which also pauses accrued interest—allows borrowers to stop making payments until December 31. Created by the $2 trillion CARES Act, the current student loan suspension was set to expire on September 30.
With the country still reeling from the pandemic, experts have warned there could be a wave of student loan delinquencies and defaults without more relief. Trump’s new action applies to most federal loans—but Politico reports that it still excludes about 9 million federal borrowers with loans held by private lenders or schools.
Some Democrats and Republicans have already asked for more expansive relief. The House of Representatives passed the HEROES Act back in May—calling for the suspension of federal payments through September 2021—but the Senate’s recent HEALS Act proposal does not offer the same break. Congress continues to negotiate on these provisions—and until they agree on the final stimulus, we won’t know if yet more help is on the way.
While the latest pause on payments is automatic, you should double-check your student loan accounts as the original deadline approaches. If you notice an error on your payment status, call your loan servicer to make a change—and submit the request in writing for your records. It’s possible the combination of relief—between Congress and executive action—may cause some confusion.
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If the extra three-month suspension offers more wiggle room in your budget, try to divert the extra money to your emergency fund. Experts recommend saving three to six months of living expenses for an emergency fund—but if you’re beginning from zero—start with $500 to $1,000.
Although savings interest rates continue to fall, there are a few decent options for where to park your money. Once you’re comfortable with your emergency fund, you may shift to paying off high-interest debt.
