On August 8, 2020, President Trump signed four executive orders that are designed to provide additional COVID-19 relief as talks on Capitol Hill collapsed on August 7 between White House negotiators and Democratic leaders over a fifth coronavirus stimulus package. One of those actions, which is directed to the Secretary of Education in the form of a memorandum (the “Memorandum”), continues student loan payment relief during the COVID-19 crisis for certain federal student loans held by the Department of Education.
The Memorandum states that the Trump Administration took action to provide immediate relief to millions of student loan borrowers during the COVID-19 pandemic by both suspending loan payments and temporarily setting interest rates to zero percent on March 20, 2020, which would continue for a 60-day period. The Memorandum notes that while this relief has helped many students and parents maintain financial stability, many other Americans have chosen to pay down their student loan balances more quickly to eliminate their financial obligations. In this manner, “borrowers have been able to determine the best path forward for themselves.”
In the interim, Congress enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) on March 27, 2020, which provided similar student loan payment relief. That legislative moratorium is set to expire on September 30, 2020. In light of the upcoming expiration, the Trump administration believes it is “appropriate to extend this policy until such time that the economy has stabilized, schools have re-opened, and the crisis brought on by the COVID-19 pandemic has subsided.”
Toward that end, the Memorandum directs the U.S. Secretary of Education Betsy DeVos to take action pursuant to applicable law to effectuate appropriate waivers of, and modifications to, the requirements and conditions of economic hardship deferments described in section 455(f)(2)(D) of the Higher Education Act of 1965 (20 U.S.C. § 1087(f)(2)(D)) and provide such borrower deferments as necessary to continue the temporary cessation of payments and waive all interest on federal student loans held by the Department of Education until December 31, 2020. The Memorandum notes that all borrowers who wish to continue making student loan payments will be allowed to do so, notwithstanding the extension of the payment moratorium.
The Memorandum indicates that it will be implemented “consistent with applicable law and subject to the availability of appropriations.” Furthermore, the memorandum “is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against the United States, its departments, agencies, or entities, its officers, employees, or agents, or any other person.”
It is important to note that the Memorandum does not extend the same range of student loan relief as the CARES Act for federal student loans held by the Department of Education. As we have previously reported, for those loans Section 3513 of the CARES Act not only suspended payments and set interest rates at zero percent until September 30, 2020, it also halted collections and counted non-payment of such debt toward the required 120 monthly payments for public service loan forgiveness. The latter two protections are not referenced in the Memorandum.
Although President Trump’s Memorandum provides a stop-gap measure until agreement can be reached on the next federal stimulus package (if that is possible), like the CARES Act, it does not provide relief to borrowers whose federal Perkins and Federal Family Education Loan Program debt are privately held. As we have previously noted, as many as 9 million borrowers fall into this category. Although the Department of Education issued guidance stating that the owners of such loans can voluntarily provide the same interest and payment relief afforded to such borrowers as is provided under the CARES Act, trade associations and consumer advocates believe that legislative language is required to make this obligation mandatory.
Finally, neither the Memorandum nor the CARES Act covers private student loans. Any attempt to amend the interest rate and payment terms on private student loans would raise serious Constitutional issues.
Media reports also indicate that student loan relief is one of the key sticking points in negotiations on the fifth federal stimulus package. Apparently, Democratic leaders had pushed for a provision that would require the U.S. government to help pay down federal and private student loans so that balances would be reduced by at least $10,000 by the end of the pandemic, which White House negotiators had rejected.