The current payment pause and interest waiver on federal student loans held by the U.S. Department of Education expires on September 30, 2020. Education Secretary Betsy DeVos announced on August 21, 2020 that she is extending the student loan payment pause and interest waiver through December 31, 2020, as directed by President Trump’s August 8, 2020 executive memo

Automatic Extension to Payment Pause and Interest Waiver

The extension will be automatic and includes a continuation of the interest waiver on the paused loans.

The extension, which will cost more than $15 billion, applies to all federally-held federal student and parent loans, including all loans in the William D. Ford Federal Direct Loan Program (Direct Loans). It does not apply to commercially-held federal loans or private student loans. 

Borrowers with loans in the Federal Family Education Loan Program (FFELP) can consolidate their loans into the Direct Loan program to qualify. 

See also: Options for Pausing Private Student Loans During Coronavirus

Paused Payments Count as Payments

The paused payments will count toward Public Service Loan Forgiveness (PSLF) if the borrower satisfies the other requirements for PSLF, such as working full-time for a qualifying employer. 

The paused payments will also count toward the 20 or 25-year forgiveness under income-driven repayment plans.

Borrowers who still have jobs can choose to continue making payments on their loans, in which case the payments will go entirely to principal. However, such payments do not count as extra payments, so they will just reduce the amount of forgiveness the borrower will eventually receive. Borrowers who aren’t pursing loan forgiveness might consider applying the money to the loans with the highest interest rate, such as parent and private loans or credit card debt. 

Impact on Defaulted Federal Student Loans

Collection activity on defaulted federal student loans will remain suspended. In particular, the U.S. Department of Education will not garnish the wages of defaulted borrowers, seize income tax refunds or reduce Social Security disability and retirement benefits. 

However, the announcement from Secretary DeVos does not specify whether the paused payments will count toward the rehabilitation of defaulted federal student loans.