- There is a temporary halt on payments due on federal student loans, and the interest rate has been reduced to 0%.
- This provision currently runs through September 30, 2020, but ongoing discussions in Washington may extend the payment and rate relief beyond the fall.
- The American Council on Education, representing 1,700 colleges and universities, proposes relief “until June 30, 2021, or until the unemployment rate falls below 8% for three consecutive months.”1
Paying Down Debt
The prospect of paying down – or extinguishing – high-interest debt can be very attractive. More than 45 million Americans hold student loans averaging $31,000 – and national data shows that more than a third of student loan borrowers are over 40 years old (Figure 1). You or someone you know could potentially benefit from this approach.
Figure 1: Total Student Loan Balances by Age Group
Source: New York Fed Consumer Credit Panel/Equifax
The government-issued student loans that support both undergraduate and graduate tuition have fixed interest rates ranging from 3.8% to 6.8% in the last decade (Figure 2). But today, that borrowing rate is 0%.
Figure 2: Federal Student Loan Interest Rates by Year Issued
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