The Coronavirus Aid, Relief, and Economic Security (CARES) Act is a federal law that has just changed how many student loans will be handled for the next several months.
The main takeaway from the law is that it will suspend principal and interest payments on federal student loans until September 30, 2020.
Here are some more details worth noting:
There’s no need to apply.
The CARES Act automatically suspends payments, so you don’t have to apply in order to receive any relief. While you could contact your student loan servicer with any other questions about your debt, it’s not necessary as far as current payments are concerned.
Private student loans are not included.
Federal student loans are the only ones included under the CARES Act. Since the government is responsible for issuing the majority of student loans over the last 10 years, there’s a good chance you’ll be able to benefit somehow.
If all of your loans come from schools, credit unions, banks, or other private entities, your payments will not be suspended automatically.
To see if your private loan servicer has offered any similar relief due to COVID-19, contact them as soon as possible.
It’s worth noting that some federal loans are not held by the government. One example is Perkins Loans, which are held by your university. Another is Federal Family Education Loans (FFEL) that are held by commercial lenders. Payments for such loans will not be covered by the CARES Act.
Interest will not accrue on federally-held loans.
As long as your federally-held payments are suspended, there’s no need to worry about accruing interest. Again, some Perkins and FFEL loans are not covered.
There is no fee to suspend your payments.
The government is suspending payments through the CARES Act to help people cope with the coronavirus’s negative economic impact. As such, you will not have to pay a fee to suspend your payments.
If someone contacts you offering to suspend your student loan payments for a fee, report them to the Federal Trade Commission.
It doesn’t matter if you cannot afford to make payments right now.
Whether you’re completely out of cash or have already started an income-driven repayment plan, there’s no need to worry about making a payment at this time. With payment suspended until September 30, 2020, on government-held loans, no money is due for a while.
Loans that are in default are fine for now.
Collection efforts on federally-owned student loans that have defaulted have stopped. This includes collecting via:
- Social Security benefits
- Tax refunds
- Wage garnishment
Contact your private loan servicer regarding other options.
Since private loans do not fall under the CARES Act, you will need to contact your loan servicer to see what you can do to make your payments more manageable. You may be eligible for a forbearance that postpones payments. You may also be able to set up a payment plan based on your income.