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 Financial Impact of the Coronavirus

A few months ago, we told you that the Coronavirus Aid, Relief, and Economic Security (CARES) Act gave some flexibility to federal student loan borrowers. Understanding these options can help you make more informed decisions about paying your bills and prioritizing your debts. The benefits have been extended until December 31, 2020.

So, just to recap, what does the CARES Act mean for you if you have a federal student loan?

1. The CARES Act gives temporary payment relief to borrowers with qualifying federal student loans. But some federal student loans don’t qualify – for example, older Family Federal Education Loan (FFEL) program loans or Perkins Loans that are owned by the school you attended. Contact your federal loan servicer online or by phone to find out if your loans are eligible. 

2. If your federal loans are covered, the U.S. Department of Education has automatically placed your loans into what’s called “administrative forbearance.” That means you can stop making payments on those loans right away, up through December 31, 2020. If your payments automatically come out of your bank account, check if any payments have been processed since March 13, 2020. If they have, you may be able to get a refund as part of administrative forbearance. 

3. If you want to keep making payments on your qualifying federal student loan through December 31, the interest rate is now 0%. So any payments you make during the forbearance period may help you pay off your debt faster. If you’re on an income-based repayment program and/or a forgiveness program, you should check out Federal Student Aid's Coronavirus page to see which option makes sense for you.

4. If your federal student loans are in default, the U.S. Department of Education has stopped making collection calls, and sending letters or billing statements through December 31, 2020. And if your federal loans were in default and your employer continues to garnish your wages, you’ll get a refund. 

This program only applies to federal student loans. Not sure what kinds of student loans you have? Here are two things you can do to find out:

One more thing: you don’t need to hire a company to help you get this student loan payment relief. The program is already in place and there’s nothing you need to do to enroll.

Updated September 14, 2020 with new information about how the CARES Act flexibilities for federal student loan borrowers have been extended until December 31, 2020. 

Tagged with: coronavirus, debt, loan, student

Comments

Hello, are the federal loan companies allowed to mark your federal loans (that fall under this) as in deferment to the credit bureaus? My understanding was that they were supposed to report to bureaus as they normally would, not mark as deferred.

Thank you!

Fyi, it's a gsl loan in default I have paid monthly on since 2018 and every month prior to that except a default in 97. The second default was A short default during irma Where I didn't get reduced to zero income proof in timely after destruction of my entire community And when I called to reinstate I was told I could NEVER EVER REINSTATE No matter payments And would stay in default no matter. I have paid monthly since 2018 anyway hoping for a change in that dumb policy

This is useful if you are in a position to make the payments anyway. I am paying down other debt with the money I would have spent on student loans. I haven't been laid off yet, but it's good here to assume the worst.

I think this is good for the students

Sadly it is not. people should check their credit score. It showed up as a non-payment since May. Unbelievable

same for me. I worked hard to improve my credit and just saw a 18 point drop in my credit score because of this. Just doesn't seem right when we are struggling right now. :(

Yea great information. However, I just noticed my credit report. Since the refunded and stopped the payments, it now affects my credit score negatively.

So I just saw that my student loan went into administrative forbearance (without my consent) and Equifax tanked my credit score 53 points. Doesn’t sound like an intended consequence of this policy. Pretty insane that Equifax wouldn’t have thought this through, but if this is widespread, I can’t imagine how that’ll impact the broader economy as a whole, especially as lending standards get more stringent.

Is this why my credit score went down? I’m on the IBR plan.

So here it says that we can make payments while in 0% interest, but other places it says the 0% interest will be removed. Could anyone clarify?

Hello, I suppose you should check with your specific Federal loan provider. However, I've been making manual payments throughout the administrative forbearance period and have not incurred any interest on my Federal loans throughout that time.

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