Student loan payment pause gets a second act — how will it help gig workers?
● A pause on student loan payments and interest has been extended through December 31, 2020
● There are 42.8 million Americans with student loan debt
● The average amount of debt held is $35,397
● Total student loan debt is $1.64 trillion
● The student loan delinquency rate is at 11.1 percent
● The relief does not apply to private loans — Federal Family Education Loans (FFEL) and Perkins loans, held by about 8 million borrowers
Although the House and Senate were unable to agree on a second stimulus relief bill for Americans earlier this month, President Trump issued four executive orders the following day, one of which was continuing a pause on student loan payments and accrual of interest on all loans through December 31, 2020.
While the executive order stopped short of any loan forgiveness, it will allow a little breathing room for gig workers struggling in the wake of the pandemic and those currently unemployed who may have started gig work to help make ends meet while worried about paying for their student loans.
What relief does the August 8 executive order on student loans provide?
Here are the crucial details of the order’s memorandum, titled “Continued Student Loan Payment Relief During the COVID-19 Pandemic,” which is basically an extension of the $2.2 trillion CARES Act provision for student loans:
1. places a pause on all payments for federal student loans;
2. sets interest rates on federal loans at zero percent, so no interest will accrue on your loan;
3. halted collection actions of all federal student loan debt;
4. counts each non-payment of federal student loan debt toward the 120 required monthly payments for public service loan forgiveness.
Two types of loans that this payment pause does not apply to are Federal Family Education Loans (FFEL) and Perkins loans which are private loans held by about 8 million borrowers. Many borrowers carry both covered and non-covered loan debt.
For those of you with FFEL or Perkin’s loans, you may have already applied for forbearance or unemployment deferment. But, if you haven’t and you’ve been struggling with keeping up on your loan payments, here’s a list from NerdWallet of lenders who offer student loans which include fixed and variable APR rates.
How can gig workers take advantage of this student loan deferral period?
For the lucky workers with student loan debt who’ve been able to keep their jobs or work during the pandemic and keep up on their payments, keep it up.
No one has a crystal ball, but the economy is going to be challenging going into 2021, and the less debt you have the more you will be able to use credit as a safety net should you need it.
For those of you who breathed a sigh of relief when the executive order was announced, keep the financial pressure on yourself to pay off high-interest credit card debt and build up a safety net for the unpredictable times ahead with the money you would have used for your loan payment — save or pay off more if you can.
The average student loan payment is about $400 per month. Saving at least that amount over the next four months — or paying off credit card debt — would give you a minimum $1,600 cushion for what may lay ahead.
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