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What you need to know about student loans and the coronavirus pandemic

This blog was originally posted on March 26, 2020 and was updated on April 9, 2020 to reflect new information.

Student loan borrowers now have more benefits to consider when planning for the potential financial impact from coronavirus. A new federal law, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, provides automatic suspension of principal and interest payments on federally-held student loans through September 30, 2020. These suspended payments will count towards any student loan forgiveness program, as long as all other requirements of the loan forgiveness program are met.

Here are some key things you need to know about how this may affect you.

Do I need to apply to suspend my payments or interest on my federally-held student loans?

No. From March 13 through September 30, 2020, the interest rate is set to 0% and payments are suspended for student loans owned by the federal government. Your federal student loan servicer will suspend all interest and payments without any action from you. You do not need to contact your student loan servicer.

If you made a payment toward your federally-held student loans after March 13, you can request a refund from your student loan servicer. However, if you are financially able to make payments or continue making payments on your student loans, any payments you made or make after March 13 will be applied directly to principal. This will help you pay off your loans faster.

Are interest and payments suspended on all of my student loans, including my private student loans?

No. The suspension of payments applies only to student loans that are held by the federal government, which are the vast majority of student loans issued since 2010.

Some federal student loans under the Federal Family Education Loan (FFEL) Program are owned by commercial lenders, and some Perkins Loans are held by the institution or school you attended. Your FFEL lender or school may choose to suspend interest and payments on a voluntary basis, but they are not required by law to do so. You can contact your servicer to find out if these options are available to you.

The benefits authorized by the CARES Act also do not apply to private (non-federal) student loans owned by banks, credit unions, schools, or other private entities. Many private student loan lenders are offering extended forbearance options and other benefits. Contact your lender or servicer for more information. If you don’t think you can afford your payment, some of your options are discussed below.

Someone contacted me to pay a fee to suspend my payments. Is this a scam?

Yes! The federal government will not ask for a fee to suspend your payments. There is no action required of you. If someone asks for money to process this information, it is a scam and you should report them to the FTC’s complaint assistant .

You do not need to pay someone to help with your student loans. You should also be aware of these warning signs to help you avoid student loan debt relief scams, as well as how to get help if you are a victim of a scam.

Will I get confirmation that interest and payments have been suspended for my federally-owned student loans?

As noted above, your federal student loan servicer will suspend all interest and payments without any action from you. Servicers are required to send you written notification explaining the suspension of interest and monthly payments between March 13 and September 30, 2020. These notices are expected to be sent by mid-April. Make sure your servicer has up-to-date contact information and check your mail or email.

I can’t afford my student loan payments, what should I do?

For your federally-held loans, you don’t have to make a payment because your payments will be suspended until September 30, 2020.

For all other loans, including federal loans held by commercial lenders, schools, or other private lenders, you should contact your servicer to explore the available options discussed below.

Federal student loans held by commercial lenders or your school

Not all federal student loans are held by the Department of Education. Some loans under the Federal Family Education Loan (FFEL) Program are owned by commercial lenders, and some Perkins Loans are held by the institution or school you attended.

FFEL lenders and schools may choose to offer interest and payment suspension benefits. If you have FFEL or Perkins loans, you should contact your student loan servicer for more information.

For all federal student loan borrowers, you may also want to investigate income-driven repayment plans if you are not already enrolled. Depending on your income or family size, your payments could be as low as $0. You may be able to enroll online without calling your servicer by visiting: .

Tip: If you already enrolled in an income-driven repayment plan but are experiencing a change in income, ask your servicer to recalculate your monthly payment.

If you are still required to make a payment that you can’t afford and you only need a temporary pause on payments, investigate whether deferment or forbearance is an option for you. Servicers have been authorized to grant a 90-day forbearance to borrowers who are experiencing financial difficulties due to the pandemic. Putting your loans into a deferment or forbearance will not result in negative credit reporting. Again, you should contact your loan servicer to explore your options. You can fill out forms on your servicer’s website or ask your servicer for assistance.

Tip: For Perkins loan borrowers, the Department of Education authorized institutions to grant forbearance, not to exceed three months. You must request this from your institution. Additionally, you are not required to provide documentation to be considered for forbearance. This forbearance counts toward the cumulative three-year maximum allowed for Perkins loan forbearance.

Private student loans

Many private lenders have already implemented forbearance options that will allow borrowers to postpone monthly payments, some for up to 90 days. Some private lenders also are waiving late fees and will not file negative reports to consumer reporting agencies. Some private lenders also offer their own reduced payment options. To find out what is available to you, contact your student loan servicer.

I am working toward Public Service Loan Forgiveness, what impact can this have on my progress?

If you are working toward Public Service Loan Forgiveness (PSLF) you need to be aware of a few key items. Only Direct Loans are eligible for PSLF. All Direct Loans are owned by the federal government. For Direct Loans, even though payments are suspended, those suspended payments will count as though you had made a payment toward loan forgiveness programs as long as the other the PSLF program requirements are met.

If you have other types of federal loans and are working in public service, you can consolidate most, if not all, of those loans into a Direct Consolidation Loan, which is eligible for PSLF if other program requirements are met. Learn more about the PSLF program requirements.

My federal student loans are in default. Is there anything I can do?

The Department of Education has stopped the collection of defaulted federal student loans, including garnishment of wages and the offset of tax refunds and Social Security benefits. In addition, the CARES Act also suspends interest for federally-owned loans that are in default, through September 30, 2020. There is no additional action required from you for your federally-owned loans. For all other defaulted federal loans, contact your loan holder to find out about your options.

If you are rehabilitating a defaulted student loan, any missed payments due to coronavirus pandemic will not be considered a missed payment against your rehabilitation. Visit the Department of Education’s website to learn more about rehabilitating a defaulted federal student loan .

When do I need to contact my servicer?

If you are experiencing hardship or a loss of income and can’t afford your payment for your non-federally held loans, you should contact your servicer as soon as possible. They can discuss options with you. For all other matters, see if you can find out information on your servicer’s website, then call your servicer if you need additional help.

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