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
- 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.
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Student Debt Relief Loan Refinancing Advertiser Disclosure
“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)College Ave Refi Education loans are not currently available to residents of Maine. (2)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. (3)$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. (4)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 12/14/2020. 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.