President Donald Trump on Saturday signed an executive order continuing the pause on monthly payments and interest for many federal student loan borrowers until the end of the year.
Trump’s order is aimed at circumventing Congress to extend the emergency student loan relief granted in March under the CARES Act. That payment leeway is set to expire for roughly 40 million Americans on Sept. 30, just weeks before the presidential election.
“Today I’m extending this policy through the end of the year, and we’ll extend it further than that, most likely right after Dec. 1,” the president said before signing the order.
The White House memorandum said an extension of student loan leeway is “appropriate … until such time that the economy has stabilized, schools have re-opened, and the crisis brought on by the COVID-19 pandemic has subsided.”
The executive action provides less expansive student loan relief than some Democrats and Republicans in Congress have sought. The policy will continue to exclude roughly 9 million federal student loan borrowers whose debt is held by private lenders or their colleges.
Congressional Democrats have proposed expanding student loan relief to cover more borrowers and extending the protections for at least another year.
The Senate GOP stimulus plan released last month would allow the CARES Act student loan relief to expire. But there have been increasing calls from Republicans to provide an extension of those benefits.
As negotiations over the next round of coronavirus relief remains stalled on Capitol Hill, Trump said on Saturday that he was taking immediate action to provide borrowers with relief because administration officials have “had it” with Democrats “obstructing” the deal-making.
Trump’s order directs Education Secretary Betsy DeVos to take the necessary steps needed to continue the temporary pause on payments and the waiver of all interest on student loans held by the Education Department until Dec. 31.
Trump in March unilaterally suspended interest on federally held student loans, and the Education Department said borrowers could stop payments if they first contacted their loan servicers. The CARES Act then codified that policy into law this spring and took it a step further, automatically suspending monthly payments.
The president’s executive action will likely prove complicated for the Education Department and the companies hired to implement the policy in the coming weeks.
The CARES Act, for example, requires the department to send out notices to borrowers about the Sept. 30 expiration of benefits. The department had been preparing to begin sending those warnings as early as next week, and it is unclear whether the administration has the authority to halt them.
The mishmash of student loan relief provided through Congress and executive action could also create challenges in implementing the freeze on payments and interest.
For instance, the CARES Act required the Education Department to treat suspended monthly payments as on-time payments for the purposes of federal loan forgiveness, including under the Public Service Loan Forgiveness program. It is unclear whether the Education Department will continue that benefit.