The novel coronavirus has substantially impacted our economy, and student loan borrowers especially have reason to be concerned. Thankfully, our legislators are stepping in to help. A recent federal law signed by President Donald Trump, the CARES Act, gives student loan borrowers with federally held student loans a six-month reprieve from payments March 13th, 2020 through September 30th, 2020. However, not all federal student loans qualify under the law. We’ll break down what’s going on.
Do my loans qualify?
All federally held student loans qualify under the law. Federal Family Education Loans (FFEL) and Perkins Loans, however, do not qualify. This is because these FFEL program loans are commercially held – issued by banks, not the government – and Perkins Loans are owned your college or university. Contact your loan servicer to find out what type of loans you have (see below for instructions on how to do this).
The government stopped issuing FFEL loans in June 2010. That means the vast majority of federal student loans issued after June 2010 will qualify, according to the Consumer Financial Protection Bureau. Federal student loans you took out before June 2010 may or may not qualify. However, there’s good news: you may be able to consolidate your FFEL or Perkins Loans into a Direct Consolidation Loan to be eligible for benefits under the CARES Act. Learn more at the consolidating federal education loans page of the U.S. Federal Student Aid website.
The National Consumer Law Center estimates that 9 million borrowers with federal student loans will not qualify under the CARES Act, because their loans are either commercially held or are Perkins Loans owned by their school.
How do I find out who my loan servicer is? How do I contact my loan servicer?
If you don’t know who your loan servicer is or how to contact them, visit StudentAid.gov with your Federal Student Aid ID, or call the Department of Education at 1-800-4-FED-AID (1-800-433-3243; TTY for the deaf or hearing-impaired 1-800-730-8913) for assistance in contacting your loan servicer.
How do I know if my loans are “federally held”?
Call your loan servicer and ask them: “I would like to know whether my federal student loans are still federally held.”
A third option: you can log into StudentAid.gov using your Federal Student Aid ID. (You can sign up through the U.S. Federal Student Aid website if you don’t already have an account.) Go to your profile and select “My Aid.” At the bottom of the page, it will say “Loans Serviced By” with the name of your loan servicer. If that name begins with “DEPT OF ED/,” your loans are federally held and you qualify for a suspension on payments until September 30th. If not, double-check with your loan servicer.
Do I have to ask my loan servicer to suspend payments for my loans?
No. It will happen automatically if your loans qualify.
Can I get a refund for payments made after March 13, 2020?
Yes. Contact your loan servicer to request refunds for payments made after that date.
Can I still make loan payments if I want?
Yes, the suspension is optional – you can still make payments if you’d like.
What happens if I’m seeking Public Service Loan Forgiveness?
The sixth-month reprieve will not undo your progress towards Public Service Loan Forgiveness (PSLF) if you are still working for a qualifying employer.
I’m currently on an income-driven repayment (IDR) plan. Will my suspended payments count toward IDR forgiveness?
What about the interest rates on my loans?
The Department of Education has set all interest rates on federally held student loans at 0% until September 30th. If you make payments during the six-month reprieve, they will first go towards paying any accrued (i.e. accumulated) interest you have and then towards the principal of your loan.
What if my income changed recently due to COVID-19?
Contact your loan servicer as soon as possible to explore options such as applying for income-driven repayment (IDR), which can lower your payments. You can apply online for IDR through the U.S. Federal Student Aid's income-driven repayment plan page.
Congress is already discussing a Phase Four stimulus package and it is likely student loan borrowers will be a part of that conversation in the coming weeks. In addition, it has been reported that some private lenders have been giving relief to borrowers on an individual basis. It’s currently unclear how widespread that relief is and whether it involves fees, interest accrual, or negative credit reporting.
Debt relief for consumers is another important piece that hasn’t been included in Congress’s coronavirus relief packages so far. Timberline Financial offers debt resolution, credit counseling, debt consolidation, and other personalized programs to help reduce debt.
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