Interest will not accrue on student loans during periods of unemployment and hardship deferments. Student loan interest that has previously accumulated during unemployment or hardship deferments since 2007 will be cancelled. This will apply to all student loans, no matter how long ago they were started.
Why is this important?
Borrowers shouldn't be asked to repay the principal on their student loans twice. But that is the current situation. During periods of unemployment, when people have an unemployment or hardship deferments, the interest continues to accumulate. Currently, for loans consolidated before 1994, the interest is locked at 8%. During the deferment period, interest continues to accrue. The interest exceeds the amount that the borrower has already paid back and the balance reverts to even more than the original principal. The result is that student loan borrowers are being forced to pay pack their loans twice or even three times.
Some of the legislation to help borrowers applies only to relatively recent student loans and not to old student loans that are still being repaid.
