A day after it announced it was canceling the student loan debt for 230,000 individuals with student loan debt who had become permanently disabled during the COVID-19 pandemic, the Department of Education yesterday announced it was expanding a moratorium on federal student loan interest and collections on all defaulted loans under the Federal Family Education Loan (FFEL) program. The moratorium will affect more than 1 million student loan borrowers.
Under the Department’s announcement, the interest rate on defaulted loans under the privately held FFEL program will stay at 0% and collections activity on those 1.14 million loans will be paused. The changes are being made retroactively to March 2020. Any funds that have been seized or garnished during the past year will be returned back to the borrowers, the DOE said.
Any loan that has gone into default in the past year will be returned to good standing, the Department also announced. Those loans had been ineligible for the moratorium because their loans were being held by private entities.
“At a time when many student loan borrowers have faced economic uncertainty, we’re ensuring that relief already provided to borrowers of loans held by the Department is available to more borrowers who need the same help so they can focus on meeting their basic needs,” said Education Secretary Miguel Cardona, in a statement. “Our goal is to enable these borrowers who are struggling in default to get the same protections previously made available to tens of millions of other borrowers to help weather the uncertainty of the pandemic.”
Earlier this week, the Department announced it was providing relief to 230,000 borrowers who have had their loans discharged because of permanent disability. About 41,000 of those borrowers who had their loans reinstated will get their discharges back, and the other 190,000 borrowers — who are in their monitoring periods — will not be asked to submit earnings documentation. The monitoring requirements will be waived for the duration of the national emergency that has been declared as a result of the COVID-19 pandemic.