On March 27, 2020, the president signed the CARES Act into law, which, among other things, provides broad relief for federal student loan borrowers.

But what does it really mean for you?

From March 13, 2020, through Sept. 30, 2020, the interest rate is 0% on the following types of federal student loans owned by Department of Education (ED):

  • Defaulted and non-defaulted Direct Loans
  • Defaulted and non-defaulted FFEL Program loans
  • Federal Perkins Loans

What is NOT included –

FFEL Program loans owned by commercial lenders and Perkins Loans owned by the institution you attended. These loans are NOT eligible for this benefit at this time.

Additionally, private student loans are NOT eligible. ED does not have legal authority over private student loans, and they are not covered by the CARES Act.

What do YOU need to do?

  • If you have a qualifying loan, you do NOT need to do anything; your accounts will be set at 0%. ED will automatically adjust your account so that interest doesn’t accrue (i.e., accumulate). The account adjustment will be effective March 13, 2020.
  • You are NOT required to make payments during this time. Loans will be placed in administrative forbearance. This will suspend your payments from March 13, 2020, through Sept. 30, 2020.
  • If you are currently in an income-driven repayment (IDR) plan your payments WILL count towards your IDR forgiveness.
  • Your suspended payments WILL count toward Public Service Loan Forgiveness (PSLF), assuming you met prior qualifications prior to the CARES Act.
  • Your auto-debits WILL be suspended. Any that are processed between March 13th – September 30th may be refunded to you.
  • Your suspended payments WILL count towards trying to rehabilitate your defaulted student loan.
  • You CAN request that funds from your federal tax refund be returned to you if withheld due to defaulted student loans, as long as it was in the process of being withheld on or after March 13th.
  • You WILL have any garnishment stopped related to student loan debt. Your HR should receive a letter from ED.
  • However, if you decide to make payments during the 0% interest period, the full amount of your payments WILL be applied to principal once all the interest that accrued prior to March 13 is paid.

At any rate, the 0% interest period and administrative forbearance is currently set to expire on Sept. 30, 2020. Your servicer will contact you, no later than in August, to remind you that you will need to start making payments again. Make sure your contact information is up to date in your loan servicer account profile.

If you can, now would be an excellent time to put (this extra) money towards those private and Perkins loans. In this never-ending student debt crisis, we need to work to get balances down when and where we can!

Stay safe.