The economic shutdown caused by the coronavirus has caused 20.5 million Americans to lose their jobs in April alone. This led to an unemployment rate of 14.7% for the month of April (reported May 8th), the highest unemployment this country has seen since 1936. Thankfully the U.S. government has been responsive and quickly passed the CARES Act. Continue reading to see how the CARES Act can offer you relief from your student loans in this time of uncertainty.
Administrative Forbearance From March 13, 2020 to Sept 30, 2020
All federal student loans have been automatically placed into an administrative forbearance from March 13 until September 20. A forbearance is a pause of your student loans, which typically accrues interest during this period. Due to the coronavirus pandemic, the Department of Education has reduced interest rates on some federal student loans to 0% through Sept 30th, 2020. So, there will be no interest accruing on your federal student loans during this forbearance
0% Interest Rate on Federal Student Loans
As mentioned previously, there will be a 0% of interest applied to federal student loans from March 13th, 2020 until September 30th, 2020. It’s currently unknown what will happen after September 30th. It’s possible they will extend the forbearance and 0% interest rate period if the economy and virus do not show improvements.
Which Loans Have 0% Interest?
Here are the loan types which have automatically adjusted to the 0% interest rate:
- Defaulted and nondefaulted Direct Loans
- Defaulted and nondefaulted FFEL Program loans
- Defaulted and nondefaulted Federal Perkins Loans
- Defaulted HEAL loans
This applies only to the loans which are federal. Some loans are owned by private lenders, or the institution which you attended. Those loans are not eligible for the 0% interest rate adjustment. If you aren’t sure if your loans are federal or private, contact your lender to find out. You can use studentaid.gov to find out who your loan servicer is.
Pause on Wage Garnishment and Collections
On March 25th, The U.S Department of Education released a bulletin stating that the Department will stop all collection actions against student loan borrowers. This goes on to include wage garnishments.
“These are difficult times for many Americans, and we don’t want to do anything that will make it harder for them to make ends meet or create additional stress,” said Secretary DeVos. “Americans counting on their tax refund or Social Security check to make ends meet during this national emergency should receive those funds, and our actions today will make sure they do.”
The pause on wage garnishments requires the employer to make the change to the borrowers paycheck. If your employer has not made that change, you should request them to do so directly.
If you were previously in a paying arraignment with a collections agency, you are advised to contact that Department of Educations Default Resolution Group at 1-800-621-3115 (TTY for the deaf or hearing-impaired 1-877-825-9923).
How Coronavirus Impacts Student Loan Forgiveness
With the suspension of payments through September 30, 2020 many borrowers are left wondering what will happen with their student loan forgiveness. Currently, here is what is known:
- Payments that are in forbearance will continue to count towards your income-driven forgiveness plan.
- Payments that are in forbearance will continue to count towards your public service loan forgiveness as long as you meet the other qualifying payment requirements.
Private Student Loan Relief For Coronavirus Impact
If you have private student loans you will need to look into your lenders individual policy during this time. Fortunately many private student loan lenders have offered relief. Here are some of the lenders we work with and their policies:
- Earnest – Three months of postponed payments, through a disaster forbearance, to qualified clients who request it.
- CommonBond – If you are unable to make payments during the COVID-19 outbreak, you can take advantage of CommonBond’s natural disaster forbearance, which allows payments to be paused for the duration of the national emergency.
- LendKey – LendKey is a servicer that works with many lenders, each with their own policies. Reach out to email@example.com for more information if you refinanced with LendKey.
- CollegeAve – CollegeAve is offering a Disaster Forbearance program that temporarily suspends required payments on College Ave student loan(s) for three consecutive months.
Frequently Asked Questions
Can I continue to make payments during the administrative forbearance?
Yes, you can continue to make your normal payment during the forbearance period. You may also choose to pay less if you desire. Your payment should be applied directly to the principal of your loan if you have no outstanding interest on the loan. This may be a good time for you to try and pay down your loan.
I was paying in an Income-Driven Plan but I lost my job. What can I do?
If you were on an IDR prior to covid19 and lost your employment, you can recalculate your monthly paying by going to studentloans.gov.
How will I know when I should start making payment again?
The administrative forbearance is set to expire on September 30th, 2020. Your servicer should contact you prior to then to notify you of an upcoming payment due. In the event that does not happen, you should reach out to them directly to find out your payment due date.
Compare the Best Student Loan Refinance Rates
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Student Debt Relief Loan Refinancing Advertiser Disclosure
College Ave: College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply. (1)The 0.25% auto-pay interest rate reduction applies as long as the borrower or cosigner, if applicable, enrolls in auto-pay and authorizes our loan servicer to automatically deduct your monthly payments from a valid bank account via Automated Clearing House (“ACH”). The rate reduction applies for as long as the monthly payment amount is successfully deducted from the designated bank account and is suspended during periods of forbearance and certain deferments. Variable rates may increase after consummation. (2)$5,000 is the minimum requirement to refinance. The maximum loan amount is $300,000 for those with medical, dental, pharmacy or veterinary doctorate degrees, and $150,000 for all other undergraduate or graduate degrees. (3)This informational repayment example uses typical loan terms for a refi borrower with a Full Principal & Interest Repayment and a 10-year repayment term, has a $40,000 loan and a 5.5% Annual Percentage Rate (“APR”): 120 monthly payments of $434.11 while in the repayment period, for a total amount of payments of $52,092.61. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary. Information advertised valid as of 1/27/2021. Variable interest rates may increase after consummation.
ELFI: Subject to credit approval. Terms and conditions apply. To qualify for refinancing or student loans consolidation through ELFI, you must have at least $15,000 in student loan debt and must have earned a bachelor’s degree or higher from an approved post-secondary institution.
LendKey: Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
CommonBond: Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate.
Splash Financial: Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval.com
Earnest: To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest’s fixed-rate loan rates range from 3.89% APR (with autopay) to 7.89% APR (with autopay). Variable rate loan rates range from 2.50% APR (with autopay) to 7.27% APR (with autopay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms of 10 years or less. For loan terms of 10 to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 0.26% and 5.03% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of April 23, 2019 and are subject to change based on market conditions and borrower eligibility.
Auto Pay Discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 04/23/19. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice.
Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 303 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, e-mail us at firstname.lastname@example.org, or call 888-601-2801 for more information on our student loan refinance product.
Ascent: Ascent Student Loans are funded by Bank of Lake Mills, Member FDIC. Loan products may not be available in certain jurisdictions. Certain restrictions, limitations; and terms and conditions may apply. For Ascent Terms and Conditions please visit: www.AscentFunding.com/Ts&Cs. Rates are effective as of 10/01/2022 and reflect an automatic payment discount of either 0.25% (for credit-based loans) OR 1.00% (for undergraduate outcomes-based loans). Automatic Payment Discount is available if the borrower is enrolled in automatic payments from their personal checking account and the amount is successfully withdrawn from the authorized bank account each month. For Ascent rates and repayment examples please visit: AscentFunding.com/Rates. 1% Cash Back Graduation Reward subject to terms and conditions. Cosigned Credit-Based Loan student must meet certain minimum credit criteria. The minimum score required is subject to change and may depend on the credit score of your cosigner. Lowest APRs require interest-only payments, the shortest loan term, and a cosigner, and are only available to our most creditworthy applicants and cosigners with the highest average credit scores.