Here’s how my new student loan plan works

President Donald Trump waives interest payments on student loans.

Here’s what you need to know and how it works.

New student loan plan

Trump made a surprise announcement from the White House yesterday: he will waive interest payments on federal student loans. So what does this mean and how does it work? Although the full details have not been released, here is the latest:

  1. No interest payments will be made on federal student loans temporarily.
  2. This only applies to federal student loans, not private student loans.
  3. Interest waiver applies only to “student loans held by federal government agencies”. Therefore, some federal student loans may not be eligible.
  4. The waiver applies only to interest payments, not to the main payments.
  5. The waiver of interest will be effective “until further notice”.
  6. It is not necessary to register for an interest rebate. Interest should be automatically canceled.
  7. You still need to pay off student loans. A waiver of interest does not mean “no student loan payment”.
  8. Interest waivers could start as early as a week.
  9. Borrowers who are enrolled in an income-oriented repayment plan such as IBR, PAYE, REPAYE or ICR, for example, or tolerance for federal student loans are eligible.
  10. There is no indication of any interest limit, so borrowers with high-level federal student loans could potentially save more.

Importantly, waiving interest does not mean forgiving the student loan. This is not the student loan forgiveness plan proposed by Vice President Joe Biden or Senator Bernie Sanders. The balance of the federal student loan will not be exempted. That is why it is essential to continue paying student loans and not skip a payment during this interest exemption period. While Trump called for an end to the public service loan forgiveness program for several reasons in his annual budget, Trump also proposed a simplified income-based repayment plan that would offer forgiveness of the student loan.

The waiver of interest rates also comes through an aggressive rate cut by the Federal Reserve, which unexpectedly cut rates by 50 basis points earlier this month. The rate cut, supported by Trump, lowered mortgage rates to record levels and lowered student loan refinancing rates back to 1.89%.

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