Let’s answer your most common questions about student loans and coronavirus.
Here’s what you need to know.
Even if you’ve followed all the latest headlines about your student loans and coronavirus, you may still have questions. So, here are the most common questions along with answers and what to do next.
1. How does the CARES Act affect my student loans?
There are several changes, but here are the biggest:
- No federal student loan payments;
- No interest on your federal student loan payments; and
- No garnishment of wages, Social Security and tax refunds for student loan debt collection for those in default.
2. When do these benefits begin and end?
March 13, 2020 to September 30, 2020. This means that these changes are retroactive to March 13. Therefore, if you made any federal student loan payments after March 13, 2020, you can contact your student loan servicer to get a refund.
3. Is the suspension of federal student loan payments automatic?
Yes. You don’t have to take any action. Your student loan servicer will automatically set your federal student loans to a 0% interest rate. Also, you will not be billed for any monthly payments for qualifying student loan payments during this period.
4. Can I still make federal student loan payments if I want?
Yes. The suspension of federal student loan payment is optional. Therefore, you can still make federal student loan payment if you’d like. During this period, you won’t be penalized for making a payment that is less than your usual monthly payment. If there is no student loan interest, how will your monthly payments be applied? Answer: Your payment will first be used to pay off any accrued interest prior to March 13, 2020 and then will pay your principal balance.
5. Which federal student loans qualify for a 0% interest rate?
Only federal student loans owned by the federal government are eligible. This includes:
- Defaulted and nondefaulted Direct Loans
- Defaulted and nondefaulted FFEL Program loans
- Federal Perkins Loans
6. How do I know whether my federal student loans qualify?
Contact your student loan servicer to verify which student loans you have. Remember, Federal Family Education Loans (FFEL) and Perkins Loans are not eligible. Why? FFEL program loans were issued by banks, not the government. Perkins Loans are owned by colleges and universities. The good news is that you may be able to consolidate your FFEL or Perkins Loans into a Direct Consolidation Loan to be eligible for these federal student loan benefits.
7. Can I stop paying my private student loans?
No. The CARES Act only applies to federal student loans. However, there are several steps you can take to get financial relief for your private student loans. You can also refinance student loans, since interest rates are incredibly cheap right now.
8. If I don’t make any federal student loan payments, how will this affect income-driven repayment plans or public service loan forgiveness?
If you don’t make any federal student loan payments, the Education Department will still “count” non-payments as if you made them. For income-driven repayment, they will count toward the required 20 to 25 years of monthly payments. For public service loan forgiveness, they will count toward the required 120 monthly payments. However, you must have Direct Loans, been enrolled on a qualifying repayment plan prior to the suspension, and work full-time for a qualifying employer during the suspension period.
9. Can I get a refund for any payment I made after March 13, 2020?
Yes. Contact your loan servicer to request that your student loan payment be refunded.
10. My income has changed due to Coronavirus. What do I do?
Contact your loan servicer to explore options. For example, you can enroll in an income-driven repayment plan through StudentAid.gov/idr. If you’re already enrolled, this is a good time to recalculate your monthly payment based on your new income. After September 30, 2020, your income-driven repayment plan will be revised to the new payment amount (since you aren’t required to make any federal student loan payments until after that date).
The views of the author of this article do not necessarily represent the views of Gradifi. We make no claims, promises or guarantees about the accuracy, completeness, or adequacy of the information contained here. Readers should consult their own attorneys or other tax or financial advisors to understand the tax, financial and legal consequences of any strategies mentioned in this article.