President Trump signed the CARES Act into law on March 27, 2020. Federal student loan borrowers learned they would be able to stop making payments on qualified federal student loans.
While this news came as relief to many of the 45 million federal student loan borrowers, there has been some confusion since the announcement and limited information from lenders.
Federal student loan borrowers are automatically placed an administrative forbearance, temporarily allowing you to stop making payments. This is automatic.
You can stop making payments until September 30, 2020.
If you made a payment from March 13, 2020 and on, you can request a refund from your student loan servicer.
Interest rates are set to 0% during this time for all federally-owned federal education loans that are eligible for the payment pause. This includes all Direct Loans, including those in default and including Federal Direct Parent PLUS Loans.
Most FFEL Program loans are not eligible, except for FFELP loans that have been transferred to the U.S. Department of Education, such as:
- FFELP loans that are in default, for which a default claim was paid by a guarantee agency on behalf of the federal government
- FFELP loans made in 2008-09 and 2009-2010 that were transferred to the U.S. Department of Education under the Ensuring Continued Access to Student Loans Act (ECASLA)
FFELP loans held by commercial lenders, Federal Perkins Loans owned by a college and private student loans are not eligible.
Borrowers with ineligible federal education loans can consolidate them into a Federal Direct Consolidation Loan to qualify for the payment pause and interest waiver.
The 0% interest is effective retroactive to March 13, 2020 and is automatic – you do not have to apply for it.
You can continue to make payments during this time if you would like. Since no interest will accrue, your entire payment will go towards the principal balance. You can also make partial payments without penalty.
If you are on an income-driven repayment plan, this time will still count towards forgiveness at the end of the 20- or 25-year repayment term.
For Public Service Loan Forgiveness, if you have a Direct Loan, were on a qualifying repayment plan prior to the suspension, and continue to work full-time for a qualifying employer during the suspension, then you will receive credit toward PSLF for the period of suspension as though you had continued to make on-time monthly payments.
For more information on federal student loans, read the announcement.
Private student loans aren’t eligible for these benefits. However, many private student loan lenders are offering options for pausing payments. Call your lender directly to see what options are available.
If you have high-interest private student loans, you could also consider refinancing for a lower interest rate. Keep in mind that refinancing any federal student loans means you’d lose out on federal student loan benefits, including this temporary pause on payments. You’d also lose the potential for student loan forgiveness, the ability for lower monthly payments based on your income, generous deferment (payment pausing) options during times of unemployment and economic hardship, and the ability to discharge loans in death or disability.