You Haven’t Missed Out Yet
How You Can Still Take Advantage of the Student Loan Provisions in the CARES Act
On Friday, March 27th, Congress passed and the President signed into law the Coronavirus Aid, Relief, and Economic Security Act more commonly known as CARES. Emergency legislation intended to provide economic relief from the coronavirus outbreak.
The CARES Act included programs to aid federal student loan borrowers with Direct Loans.
- Subsidized
- Unsubsidized
- PLUS
- Consolidation Loans
Federal Family Education Loans (FFEL) and Perkins Loans currently owned by the Department of Education are also eligible.
Private Loans, commercially-held FFEL, and university held Perkins loans are not eligible.
Your servicer should be able to clarify if your loan is owned by the government if you are unsure. You can also log into studentaid.gov and view the loan details to see if the lender is the Department of Education.
Note if you refinanced a federal loan in the past. It probably does not qualify.
Refinances are typically handled by private lenders. Once refinanced your loans are no longer considered federal student loans since they are held by the company that refinanced them.privately.
Provisions in the Bill
- Payments are suspended for non-defaulted direct loans and FFEL loans owned by the DOE until September 30th, 2020.
- Any automatic payments setup by borrowers are disabled for the duration of the suspension
- If an auto-payment is processed you have the right to a refund
- Interest does not accrue on loans during the suspension
- Interest accrued prior to the suspension does not capitalize for up to date borrowers
- If you were in a grace period when the suspension began. Unpaid interest will capitalize when you enter repayment.
- Suspended payments count as qualifying months*** for loan forgiveness programs
- Suspended payments count as on-time months for borrowers in loan rehabilitation*** programs
- Income Driven*** Recertifications are delayed for 6 months
Department of Education Guidance on Income Driven Repayment
:
You will not have to recertify your income before Sept. 30, 2020, regardless of whether your recertification date would have happened prior to Sept. 30, 2020. As part of the administrative forbearance, your recertification date has been pushed out six months from your original recertification date. You will be notified of your new recertification date before it is time to recertify.
Verify that changes have been made on your account: Log in to your servicer’s website. The interest rate should be set to 0% and the next due date for a payment in October.
If you have been billed for a loan eligible for relief. You are entitled to a full refund of any payments made.
Defaulted Loans
Collections must cease on defaulted Direct and Department owned FFEL Loans during the Suspension
- Wages cannot be garnished
- Tax Refunds cannot be offset
- Federal benefits such as Social Security cannot be offset
If your loan is in defaulted status and any of the above occurs. You are entitled to a full refund. Call the Department of Education at 800-621-3115
You should also contact the department if any collectors contact you. They are required to cease operations through September 30th, 2020.
Employment Dependent Benefits
You may not be eligible for certain benefits if your employment status has changed. For example if you working towards Public Service Loan Forgiveness (PSLF) and lost your job or had your weekly hours reduced below 30. The suspended months will not count towards the 120 monthly payments you need to make for loans to be forgiven.
All borrowers should receive multiple notifications starting August 1 clarifying when normal payment obligations will resume.
Withdrawals
For Students choosing to leave school due to the novel coronavirus. Loan debt incurred for the period withdrawn should be canceled.
Bottom line, if you withdrew from school during the spring semester because of the coronavirus. Loans used to pay the tuition for the semester should be canceled.
Credit Score
Credit Scores should not be impacted for borrowers. In some cases servicers have inaccurately reported non-payments as delinquent though. Verify your credit score has not changed due to non-payment on loans eligible for relief.
Student Loan Benefits From Employers
Does your employer offer a student loan repayment benefit? Make sure you are taking advantage of it.
The first $5,250 of payments made between March 27 and December 31, 2020 by your employer towards your student loans are excluded from your income.
Looking for ways to relieve your student loan burden?
Click here, to grab a copy of Escape Student Loan Debt: How to Minimize Your Re-Payments.
You will walk through developing a strategy to optimize the repayment of your loans and learn how to minimize your repayments. An introduction is provided to the variety of federal and private loan programs available to reduce or eliminate your student loan debt. If you are facing financial hardships the book covers some options for discharging student loans and getting back on track.
He's published three books. Most recently The World After Covid 19: Coexisting with the Novel Coronavirus.
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