We’re in unprecedented times here during the global COVID-19 pandemic. This pandemic and the response to it left millions of Americans unemployed and struggling to meet their basic needs. Many of whom still owe money on their federal and private student loans.
If you’re one of the 44.7 million people with student debt, you’re probably looking for some relief. While there aren’t any student loan forgiveness coronavirus relief measures, there are a few different policy changes in play that will help you manage your federal student loan payments until at least the end of 2020.
Below, we’ll cover more specifics about the policy changes as well as your options if you need assistance with your private student loans.
Timeline of Coronavirus Student Loan Relief Measures
Let’s start by looking at a timeline of events:
- March 20, 2020: The Secretary of Education had the Department of Education (ED) enact the following coronavirus relief measures for all ED-held federal student loans retroactive to March 13, 2020
- Suspend loan payments
- Stop collections on defaulted loans
- Set interest rates to 0% for 60 days
- March 27, 2020: The CARES ACT extended the above relief measures through September 30, 2020
- August 8, 2020: President Trump told the Secretary of Education to extend the benefits until December 31, 2020
What Loans Qualify for Coronavirus Student Loan Relief?
You qualify to receive the benefits offered through the CARES Act and the Department of Education orders regardless of whether COVID-19 has directly affected your income, employment, or health. However, not all loan types qualify.
The relief measures referenced above (which we’ll explore more below) only apply to federal student loans backed by the Department of Education.
This includes the following types of loans:
- Direct Loans – defaulted and non-defaulted
- FFEL Program Loans – defaulted and non-defaulted
- Federal Perkins Loans – defaulted and non-defaulted
- HEAL Loans – defaulted
What if I Have Loans Not Owned By the Department of Education?
Anyone with FFEL loans, Perkins Loans, or HEAL loans not owned by the ED will need to speak to their lender directly about their options. To see who owns your student loans, visit the National Student Loan Data System.
One option may be to consolidate your loans into a Direct Consolidation Loan, which is backed by the ED. This would make your debt eligible. However, after the 0% interest rate ends, the new interest rate might be higher than your current one. Consolidating also causes all outstanding interest to capitalize, which can drive up the total cost of your loan.
If you have other private student loans and need assistance with payments, you should also reach out to your lender. Private student loans are not eligible for new benefits offered by the federal government.
Federal Student Loan COVID-19 Relief
Whether you were aware of it or not, the following relief measures took effect on March 13, 2020, for all qualifying federal student loan debt.
Loan Interest Rates Drop to 0%
Coronavirus student loan relief measures dropped the interest rate on all qualifying federal student loans to 0%. In other words, interest has not been accruing since March 13, 2020, and will not begin accruing again until at least January 1, 2020.
Loan Payment Suspension
To relieve borrowers who lost their jobs and to help the economy, the CARES Act also suspended loan payments on all qualifying federal student loans. This means that you do not owe any money on your qualifying loans for a set period.
The exact terminology is called administrative forbearance, and here’s what you need to know about it:
- It began on March 13, 2020, and currently extends through December 31, 2020
- It happened automatically
- Any auto-debits that you had set up previously stopped automatically
- While in administrative forbearance, you can continue to make manual payments of any amount
- If you want to continue to receive bills and resume your monthly auto-debit payments, you can opt-out of administrative forbearance entirely. Simply contact your loan service provider to opt out.
Grace Period Switched to Forbearance
A grace period covers the six months after you graduate, leave school, or drop below half-time status. During a grace period, interest doesn’t accumulate on subsidized federal student loans, and you do not owe any monthly payments.
Any ED-backed federal loans with grace periods ending between March 13, 2020, and December 31, 2020, did/will automatically switch over to administrative forbearance.
Example: Laura graduated from college in December 2019. Repayment for her subsidized and unsubsidized Direct Loans would normally begin in June 2020. Instead, the loans were placed automatically in administrative forbearance. Laura can make payments if she wants, but they aren’t mandatory. No interest accrues. Her monthly payment schedule won’t resume until at least the beginning of next year.
Collections on Defaulted Loans:
Thanks to the new relief measures, if you have ED-owned loans in default, you shouldn’t be hearing from collections until at least January 1, 2021. On March 25, 2020, the Department of Education contacted all its contracted debt collection agencies, informing them to stop student loan collections. This includes making calls, sending letters, and sending bills.
If you wish to move ahead with consolidating your defaulted loans or rehabilitating your student loans, you can still do so. Call the ED’S Default Resolution Group at 1-800-621-3115.
Is There Any Private Student Loan COVID-19 Relief?
Unfortunately, the Department of Education doesn’t have authority over private student loans, and the CARES Act didn’t include them either. So, as of right now, there aren’t any universal relief measures in play for the seven million borrowers with private student debt.
Fortunately, you may still have options available to you. Several states negotiated for private student loan relief measures on behalf of their state residents. This agreement, which covers borrowers in CA, CO, CN, IL, MA, NJ, NY, VT, VI, WA, and D.C., offers the following perks:
- A minimum of 90 days of forbearance
- Late payment fees waived
- A pause on debt collection lawsuits for 90 days
- Accounts reported to credit bureaus as in good standing
- Assistance enrolling in other assistance programs
Not every lender is participating in the agreement. Participating private student loan lenders include:
- Aspire Resources
- College Ave Student Loan Servicing
- Earnest Operations
- EdFinancial Services
- Kentucky Higher Education Student Loan Corp.
- LendKey Technologies
- MOHELA
- Navient
- Nelnet
- PHEAA
- SoFi Lending
- Tuition Options
- United Guaranty, now Arch MI
- Upstart Network
- Utah Higher Education Assistance Authority
- Vermont Student Assistance Corp.
If you’re not from one of those states and/or don’t hold debt from one of those companies, you still have options. Check with your lender to see what assistance programs are available. Lots of private lenders offer relief for borrowers experiencing economic hardship, unemployment, or a natural disaster.
For example, regardless of what state you live in, Earnest provides forbearance of up to 12 months for borrowers who experience an involuntary decrease in income, unemployment, a sudden emergency expense, or unpaid maternity or paternity leave.
Tips for Making the Most of Coronavirus Student Loan Relief Measures
If you haven’t been affected financially by the coronavirus, now is the time to get serious about paying down your student loans.
Here are a few tips:
1. Pay Down Private Student Loans First
Have private student debt? Focus your money on those loans first. Interest continues to accrue on private student loan debt because it wasn’t included in the relief measures. Make your normal monthly payments and then put whatever money you’d normally spend on your federal student loans on your private student loans. This will keep your monthly budget the same while allowing you to pay down debt with a higher interest rate first.
2. Consider Refinancing Your Private Student Loans
Before following tip number one, you might first want to refinance. Refinancing involves securing a new loan to pay off an old loan. It can help you achieve one or more important goals: lowering your interest rate, reducing your monthly payment, shortening your loan term, releasing a cosigner, or securing borrower protections like forbearance that your previous lender didn’t offer.
Rates are good right now too, and thanks to an announcement from the Federal Reserve in June, they’re unlikely to increase in the near future. Check out some of the best student loan refinancing companies to learn more about your options.
3. Continue to Make Payments on Federal Student Loans
If you only have federal student loan debt, focus your energy and wallet on that. Continue to make whatever payments you can. With interest rates set to 0%, 100% of the money you put on your ED-backed federal student loans goes on principal. You’ll bring your balance down faster with each payment.
You may even want to pay more than what you’d normally owe each month. By the time interest rates resume to their normal rates, you’ll have made a serious dent in your principal.
Final Thoughts on Student Loan Forgiveness: Coronavirus Edition
Student debt is burdensome, but the relief measures offered by the federal government and some private lenders should make things a little easier as the country deals with the economic effects of the coronavirus pandemic.
