Trump’s Student Loan Interest Waiver Isn’t What You May Think

At the end of a week full of talk about bailouts and stimulus, President Trump said Friday afternoon that he was waiving interest on all student loans held by federal government agencies. Right away, the most obvious question was this: How much would monthly payments fall for the tens of millions of borrowers?

By nightfall, the Department of Education had a surprising answer. Monthly payments aren’t going to go down at all. Instead, the entire payment will go toward paying down the principal amount on the loan.

The result will be little short-term relief for many of the borrowers who celebrated the announcement. Instead, they will benefit later — say, if they pay enough principal during the waiver period to shorten the scheduled term of their loans.

There is a group of borrowers who could benefit a great deal: those whose incomes have fallen, or might fall soon, because of the economic contagion of the coronavirus.