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What The Student Loan Presidential Memoranda Mean For Borrowers

Headlines about the evolving coronavirus pandemic recovery efforts have been coming in fast and furious. Following stalled negotiations to extend an economic relief package, President Donald Trump signed four executive actions on Aug. 8, intended to circumvent Congress and push out relief provisions—including, among other things, deferment of federal student loan payments.

While the news is compelling, the Executive Orders and Memoranda issued by the president raise many questions. Given this flood of information, student loan borrowers and the benefits administrators who work with them on repayment programs have a lot to unpack. Let’s walk through what the executive order means for student loan relief—and what it doesn’t.

What happened, and why

So far this year, Congress has approved $3 trillion for pandemic relief,1 but rising coronavirus cases and the pandemic’s ongoing economic impact have sparked controversy around continued federal support.

In March, bipartisan relief legislation known as the CARES ACT temporarily paused Federal student loan payments and with a temporary forbearance, rates were decreased to 0%. This program is set to expire Sept. 30, affecting 40 million Americans.2 With the deadline approaching, Congress has not been able to agree on new relief measures: House Democrats proposed a $3.5 trillion package, Senate Republicans countered with a $1 trillion proposal.1 After weeks of debate, lawmakers had parted with no deal in place and no plans to continue negotiations.

It was at this point that President Trump signed four Executive Orders and Memoranda on Aug. 8, aiming to extend payroll tax relief, eviction protections, expanded unemployment benefits, and federal student loan debt relief through the end of the year. Specifically, the president’s Memorandum on Continued Student Loan Payment Relief During the COVID-19 Pandemic states that the Secretary of Education can defer payments and waive interest on student loans held by the Department of Education until December 31, 2020.3

What does this mean for student loan debt?

To translate, those who owe Federal loans owned by the Department of Education would be able to pause their monthly payments and pay no interest through the end of the year. However, this does not extend to private student loan debt, or the nine million or so whose Federal loan debt is held by their schools or by private lenders.2

It’s also unclear how this executive action will be received: As some lawmakers have pointed out, Congress holds the constitutional authority to set the Federal budget, making it likely that some or all of the four executive actions will face legal challenges as the government works to clarify the extent of the President’s authority.4 This debate has already started, with Treasury Secretary Mnuchin defending the executive order and members of Congress on both sides of the aisle5 raising concerns over Constitutional authority.

If the student loan Memoranda is enacted, it’s critical to understand that it won’t help all student loan borrowers, offer permanent support, or solve the student debt crisis. But it may help provide short-term relief and refocus attention on the issue, whether by reinvigorating congressional negotiations or raising voter awareness that the student-debt crisis has not gone away.

Moving forward: Student loan repayment programs

The question remains whether the executive order will stand as a replacement for legislation, but it’s important to remember that the temporary relief granted to student loan borrowers in light of the coronavirus pandemic is just that—temporary.

Emergency measures play an important role and have helped many people navigate this challenging environment. As individuals build on economic recovery, we need lasting solutions for the 45 million Americans who owe more than $1.6 trillion in student debt.6 One possible pathway is through employer student loan repayment programs—a unique solution that brings businesses and individuals together to support education and solve long-term financial needs.

Among the temporary provisions of the CARES Act, employers are currently able to make tax-free contributions of up to $5,250 per employee per year without raising the employee’s gross taxable income, although state tax consequences do vary by state.7 However, this benefit is also currently set to expire at the end of the year.

If permanent solutions for student debt are important to you, please take the time to reach out to your elected officials to ask them to make this a priority. (You can identify and find contact information for your local representatives here.) We all have a role to play in building a strong recovery for our workers, students, and graduates for the long haul. For more information on student loan repayment benefits, contact Gradifi by E*TRADE.

1.          BBC, “Coronavirus: Trump signs relief order after talks at Congress collapse,” Aug. 9, 2020 https://www.bbc.com/news/world-us-canada-53712328

2.          Politico, “Trump extends student loan relief through year's end,” Aug. 8, 2020, https://www.politico.com/news/2020/08/08/trump-extends-student-loan-relief-through-years-end-392724

3.          WhiteHouse.gov, “Memorandum on Continued Student Loan Payment Relief During the COVID-19 Pandemic,” Aug. 8, 2020, https://www.whitehouse.gov/presidential-actions/memorandum-continued-student-loan-payment-relief-covid-19-pandemic/

4.          Time, “Trump Signs Executive Order, Saying It Will Extend Unemployment Benefits and Defer Payroll Tax,” Aug. 9, 2020 https://time.com/5877828/trump-coronavirus-relief-executive-order/

5.          The Wall Street Journal, “Trump's Stimulus Orders Set Off Squabble,” Aug. 10, 2020, accessed at https://www.msn.com/en-us/news/politics/trumps-stimulus-orders-set-off-squabble/ar-BB17KNl7?ocid=spartanntp

6.          Forbes, “Student Loan Debt Statistics In 2020: A Record $1.6 Trillion,” Feb. 3, 2020, https://www.forbes.com/sites/zackfriedman/2020/02/03/student-loan-debt-statistics/#35135cd6281f

7.          CARES Act 116th Congress (2019-2020). https://www.congress.gov/bill/116th-congress/house-bill/748?q=%7B%22search%22%3A%5B%22%5C%22Coronavirus+Aid%2C+Relief%2C+and+Economic+Security+Act%5C%22%22%5D%7D&s=3&r=2

The material provided by E*TRADE Financial Corporation or any of its direct or indirect subsidiaries (E*TRADE) or by a third party not affiliated with E*TRADE is for educational purposes only and is not an individualized recommendation. The information contained in the third-party material has not been endorsed or approved by E*TRADE, and E*TRADE is not responsible for the content. This information neither is, nor should be construed as, an offer or a solicitation of an offer, or a recommendation, to buy, sell, or hold any security, financial product, or instrument discussed herein, or to open a particular account or to engage in any specific investment strategy by E*TRADE.

The E*TRADE Financial family of companies provides financial services, including trading, investing, banking, and managing employee stock and financial wellness benefit plans.

E*TRADE Financial Corporate Services, Inc. recently acquired Gradifi, Inc. Gradifi offers financial wellness benefits focused on solutions for employers to provide their employees student loan and college savings benefits.

The laws, regulations, and rulings addressed by the products, services, and publications offered by E*TRADE Financial Corporate Services, Inc. and its affiliates are subject to various interpretations and frequent change. E*TRADE Financial Corporate Services, Inc. and its affiliates do not warrant these products, services, and publications against different interpretations or subsequent changes of laws, regulations, and rulings. E*TRADE Financial Corporate Services, Inc. and its affiliates do not provide legal, accounting, or tax advice. Always consult your own legal, accounting, and tax advisors.

© 2020 E*TRADE Financial Corporation. All rights reserved. 3198847.1

The material provided by E*TRADE Financial Corporation or any of its direct or indirect subsidiaries (E*TRADE) or by a third party not affiliated with E*TRADE is for educational purposes only and is not an individualized recommendation. The information contained in the third-party material has not been endorsed or approved by E*TRADE, and E*TRADE is not responsible for the content. This information neither is, nor should be construed as, an offer or a solicitation of an offer, or a recommendation, to buy, sell, or hold any security, financial product, or instrument discussed herein, or to open a particular account or to engage in any specific investment strategy by E*TRADE.


The E*TRADE Financial family of companies provides financial services, including trading, investing, banking, and managing employee stock and financial wellness benefit plans.


E*TRADE Financial Corporate Services, Inc. recently acquired Gradifi, Inc. Gradifi offers financial wellness benefits focused on solutions for employers to provide their employees student loan and college savings benefits.


The laws, regulations, and rulings addressed by the products, services, and publications offered by E*TRADE Financial Corporate Services, Inc. and its affiliates are subject to various interpretations and frequent change. E*TRADE Financial Corporate Services, Inc. and its affiliates do not warrant these products, services, and publications against different interpretations or subsequent changes of laws, regulations, and rulings. E*TRADE Financial Corporate Services, Inc. and its affiliates do not provide legal, accounting, or tax advice.


Always consult your own legal, accounting, and tax advisors. E*TRADE Financial Corporate Services, Inc., American Student Assistance (ASA), LendKey, Earnest, and MEFA are separate and unaffiliated companies.


© 2020 E*TRADE Financial Corporation. All rights reserved.