Coronavirus Student Loan Relief: How the CARES Act & Lenders Can Help

Your Guide to Coronavirus Student Loan Relief

Key Takeaways

  • Interest rates on federally held student loans are 0% from March 13-Sept. 30, 2020
  • Payments on federally held student loans suspended from March 13-Sept. 30, 2020
  • Not all federal student loans are federally held, so check with your loan servicer

President Donald Trump declared a national state of emergency in response to the new coronavirus pandemic on March 13. Since this declaration, during which the U.S. president announced a waiver of interest on federal student loans, student loan relief has been part of the efforts to address the financial impact of this crisis.

The Senate passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) which the president signed into law March 27. The CARES Act provides student loan relief in the face of this unprecedented crisis, including a full suspension of interest and payments for the vast majority of federal loan borrowers for the next six months.

So how exactly does the CARES Act help student loan borrowers? In total, there are 42.8 million borrowers who collectively owe $1.51 trillion in federal student loans, as of the first quarter of 2020, and 35.3 million of those people have at least some loans held by government agencies.

Here’s a full explanation of coronavirus student loan relief provided through the CARES Act, and where else borrowers might be able to turn for student loan assistance.

Coronavirus Student Loan Relief Provided by the CARES Act

The CARES Act offers coronavirus student loan relief to borrowers’ financial stress and hardship caused by the COVID-19 pandemic. Applied retroactively to March 13, 2020, to Sept. 30, 2020, here are the steps the CARES Act takes to aid and protect borrowers with federally-held student loans:

  • All payments due are suspended. An automatic administrative forbearance will suspend payments on all federally-owned student loans. You will not be required to make any payments toward these loans until October 2020 at the earliest.
  • No student loan interest will accrue. You won’t be charged any interest for this period of temporary student loan relief. When it ends and repayment resumes, your student loan balances will not have any interest added to them or otherwise increase.
  • Collections on federal student loans suspended. Borrowers facing involuntary collections of student loans will have these lifted. This puts a stop to student loan wage garnishments, Social Security garnishments, or tax refund offsets.
  • Student loan relief period will count toward payments made. Certain federal student loan forgiveness or rehabilitation programs require borrowers to make payments to meet eligibility requirements. Each month that loan payments are suspended under the CARES Act will still count as a payment made for these types of programs.
  • Suspended payments reported as regular payments to credit agencies. Student loan servicers are also directed to report suspended payments to credit reporting agencies as regular, on-time payments. This ensures your credit can’t be hurt (and might be helped) by the pause in payments.

Which Student Loans Qualify For Relief Under the CARES Act

In total, there are 42.8 million borrowers who owe $1.51 trillion in federal student loans, as of the first quarter of 2020, and 35.3 million of those people have loans held by the Department of Education. This includes all federal direct student loans and Stafford loans, which account for $1.25 trillion in federal student debt owed by 35.3 million borrowers, according to data from the Federal Student Aid Office.

It excludes private student loans, however, as these are owned by banks and other financial institutions. It also excludes $257.2 billion in FFEL loans owned by commercial lenders, as well as $5.9 billion in Perkins loans owned by colleges and universities. (FFEL loans were made before July 1, 2006, and Perkins loans were disbursed through June 30, 2018.)

Unsure which loans you have or if they qualify for the coronavirus student loan relief through the CARES Act? Reach out to your servicer or log into your online accounts to review account details and updates. You can also check details about your federal student loans by logging into the Federal Student Aid website.

A lot of people are calling their servicers right now, so try to remain patient, and keep notes of your phone calls in case you need to contact your servicer multiple times. Keep an eye on your account online, too.

Interest and Payment Suspensions Are Automatic

If you have qualifying federal student loans, you don't need to do anything to get the coronavirus student loan relief as outlined above. Student loan servicers must adjust interest on these loans to 0% for the relief period of March 13 to Sept. 30, 2020.

They should also automatically suspend withdrawals for payments. If you send payments rather than have your servicer debit your account, you’d likely need to stop those yourself.

When and How to Keep Making Payments

If your loans qualify for this federal administrative forbearance, payments are optional—you don’t have to make them, but you can if you wish. The full amount of any payments made from March 13 to Sept. 30, 2020 will be applied first to unpaid interest that accrued prior to March 13, then to the principal balance.

Continuing to make payments could lower your student debt balances faster and decrease the total interest you’ll pay. If you wish to continue making payments, you have to opt out of automatic forbearance with your servicer, which you may be able to do online.

If your student loan payments weren’t stopped in time, or you sent in a payment during this forbearance and now need that money back, reach out to your student loan servicer. They have been directed to refund payments made during this forbearance period (March 13, 2020, to Sept. 30, 2020) upon request from borrowers.

Coronavirus Relief for FFEL or Perkins Loans

Again, if you have a private student loan or a federal student loan not owned by the Department of Education, the above will not apply. Continue making minimum payments as required to avoid late fees, delinquency, and damaged credit.

Even though FFEL and Perkins Loans will not be covered by the CARES Act if they’re not owned by the Department of Education, you still might have some protections.

For instance: Privately held federal FFEL or Perkins loans can become eligible for CARES Act relief if you choose to consolidate these loans with a federal direct consolidation loan. Be careful with this step, however. Consolidating federal student loans is permanent and comes with some pros and cons—so learn more to decide if it could be right for you.

If you want to pause payments without consolidating, consider applying for an unemployment deferment or economic hardship deferment.

  • Deferment pauses payments. With Perkins loans and subsidized FFEL Loans, the government pays the interest for you during deferment.
  • General forbearance is offered for reasons including financial difficulties, medical expenses, or loss of unemployment. Note that interest will still accrue during forbearance on all student loans and during deferment for FFEL unsubsidized loans.

Relief for Private Student Loans

Private student lenders and servicers are not required under the CARES Act to provide any specific assistance or relief to student loan borrowers. Even so, many lenders are offering to work with borrowers experiencing a financial hardship related to the coronavirus pandemic. College Ave, for example, is offering a disaster forbearance program that can allow borrowers to pause payments for up to three months.

Commonbond is also offering national disaster forbearance to borrowers experiencing a financial hardship due to the current pandemic through to the end of the national emergency declaration.

Remember: Interest will still accrue during these periods of forbearance.

Visit your lender’s site or contact them with your inquiries about its coronavirus relief options, such as forbearance or deferment.

Stay Up to Date With Your Servicers and Lenders

Make sure your student loan accounts are up-to-date with your latest mailing address, email address, and other contact information. This ensures that you’ll receive any alerts or updates related to your student loans.

The Department of Education is required under the CARES Act to communicate to borrowers any changes to student loan accounts and tell you when payments must resume after the temporary relief ends. Student loan servicers and lenders are also likely to send you mail, email, or account messages with updates, as well.

To avoid missing any important messages, you should promptly open mail from these sources and login frequently to online student loan accounts.