Thanks to coronavirus student loan relief measures, you’re done with required federal student loan payments until 2021.
The interest-free pause on student loan payments was set to expire on September 30, but President Trump’s August 8 memorandum extended forbearance through December 31—check out our full coverage of the polices here.
Of course, that doesn’t mean you should sit by and do nothing with your loans until January 1 rolls around.
Instead, you should read on to learn about the student loan grace and forbearance coronavirus relief measures as well as what actions you can take now to stay on top of your student loans.
It Lasts Until the End of 2020
Unless challenged, President Trumps’ August 8 memorandum extends student loan grace and forbearance coronavirus relief measures through December 31, 2020.
Payment on qualifying federal student loans does not resume until January 1, 2021.
It Only Applies to ED-Backed Federal Student Loans
The CARES Act and Trumps’ memorandum only apply to the following loan types:
- Direct Loans – defaulted and non-defaulted
- FFEL Program Loans – defaulted and non-defaulted
- Federal Perkins Loans – defaulted and non-defaulted
- HEAL Loans – defaulted
Relief measures don’t apply to FFEL loans, Perkins Loans, or HEAL loans that aren’t backed by the Department of Education. Visit the National Student Loan Data System to find out who owns your student loans.
It Doesn’t Apply to Private Student Loans
Private student loans weren’t included in the relief measures. If you own private student debt and need relief, talk to your lender directly. Your lender might offer private student loan coronavirus relief or forbearance due to the economic hardship.
If they don’t, consider refinancing to a lender that does. More on that below.
Your Monthly Payments are Suspended
Borrowers with qualifying loans do not owe any monthly payments during the coronavirus administrative forbearance. All auto-debit payments are suspended.
If an auto-debit payment was processed between March 13, 2020, and December 31, 2020, contact your loan servicer for a refund.
Interest Doesn’t Accrue on Federal Student Loans
Coronavirus student loan forbearance works differently than traditional forbearance options. Interest does not accrue on your qualifying loans—even the unsubsidized ones. Beginning March 13 through December 31, 2020, the interest rate on all qualifying loans is set to 0%.
Your Grace Period Automatically Transitions to Forbearance
For any borrowers in their grace period before payment suspension started, the grace period automatically turned into administrative forbearance. Instead of some of your loans—the unsubsidized ones—accruing interest in a grace period, all of your qualifying loans will have a 0% interest rate in forbearance.
Any unpaid interest that accrued during your grace period before it switched to administrative forbearance will capitalize whenever your loan enters repayment. At this point, that will be January 1, 2021.
The Months Still Count for Loan Forgiveness and Loan Rehabilitation Programs
If you’re working toward income-driven repayment forgiveness, public service loan forgiveness, or temporary public service loan forgiveness, the months during coronavirus forbearance still count.
Suspended payments also count toward the nine months you need for student loan rehabilitation. Only the months after you enter a rehabilitation agreement count.
We Don’t Know Yet if It Will Be Extended
We’ve already seen the deadline extended, so another extension seems possible. We just don’t know. With talks of another stimulus plan continuing, we could hear soon if it will include further relief for student loan borrowers.
What You Can Do During Forbearance
Everyone’s qualifying federal student loans automatically entered administrative forbearance when the CARES Act passed. That doesn’t mean you should just ignore your loans until payments resume, though.
Here are several different moves you can choose to make while your federal student loans are in administrative forbearance:
Continue to Make Payments on Your Federal Loans
During the forbearance period, your loan balance isn’t growing, but it’s also not shrinking.
If you’re able, you can continue to make payments on your federal student loans while they are in administrative forbearance. But you will need to make these payments manually.
Any payments made will first cover any interest that accrued before rates went to 0% and then principal.
You can also make payments on any higher interest rate debt first, like private student loans or credit cards. Focusing on debts with the highest interest rates first is called the avalanche method. The Unbury Me debt calculator can help you get started.
Opt-Out of Forbearance
Your qualifying loans automatically entered administrative forbearance. If you want, you can opt-out of this forbearance.
Why would you give up paused payments?
You’d do this if you want to continue to receive bills and make payments via autopay. Loans in forbearance aren’t eligible for autopay. Any monthly payments you want to make, you’ll have to make manually.
Opt Back into Forbearance
Did you opt-out of administrative forbearance and then experience a change in income? You can opt back into administrative forbearance by contacting your loan servicer.
Other options include remaining in forbearance and enrolling in an income-driven repayment plan or recertifying your income for your current IDR. That way, you can lower your monthly payment but continue receiving a bill and making auto-debit payments.
Consolidate Other Federal Debt to Make It Eligible
If you have FFEL, Perkins Loans, or HEAL loans not backed by the ED, you might be able to consolidate them into a Direct Consolidation Loan. Since the Department of Education backs Direct Consolidation Loans, that new loan would be eligible for student loan grace and forbearance coronavirus relief.
Just know that the new interest rate of your consolidated loan (after the 0% interest rate ends) might be higher than your current one(s). Consolidating can also trigger outstanding interest to capitalize, driving up the cost of the loan.
Speak to your loan servicer directly to learn more about your options.
Enroll in an Income-Driven Repayment Plan
While payments are paused, take time to evaluate the different income-driven repayment plans (IDRs) offered by the federal government. An income-driven repayment plan can make your loans more manageable when monthly payments resume.
You have four options:
- Revised Pay As You Earn Repayment Plan (REPAYE): monthly payment equals 10% of your discretionary income divided by 12; takes family size, adjusted gross income, and federal student loan balance into account
- Pay As You Earn Repayment Plan (PAYE): monthly payment equals 10% of your discretionary income divided by 12; takes federal student loan balance, adjusted gross income, and family size into account
- Income-Based Repayment Plan (IBR): caps monthly payment at 15% of your discretionary income (10% for new borrowers) divided by 12; many borrowers owe $0 each month
- Income-Contingent Repayment Plan (ICR): monthly payment equals the lesser of 20% of your discretionary income divided by 12 or what you’d owe on a repayment plan with a fixed payment over 12 years (adjusted based on your income)
Borrowers who experience a significant drop in income or job loss should really consider enrolling in an IDR. Use our Student Loan Payment Calculator tool to see which one best meets your needs. Then, submit an income-driven repayment plan request at the FederalStudentAid website. It takes just 10 minutes to apply.
Recertify Your Information
Are you already enrolled in an income-driven repayment plan? Your recertification deadline has been changed. You won’t HAVE to recertify your income until after December 31, 2020. Your lender will notify you when it’s time.
However, if you’re unemployed due to COVID-19 or your income has dropped, you may WANT to recertify early. That way, you can determine your eligibility for a lower payment amount once payments resume in 2021.
Refinance Your Private Student Loans
If you’re still doing alight financially, now is a great time to refinance your private student loans. Interest rates for private student loan refinancing are extremely low. Plus, refinancing can help you pay off your loans faster, lower your monthly payment, release a cosigner, or get forbearance or deferment options your current lender doesn’t offer.
Review the best student loan refinancing companies we work with to learn more about your options.
The Bottom Line on Student Loan Grace and Forbearance Coronavirus Relief Measures
Once the student loan relief measures expire, you’ll need to find a way to manage your federal student loans. Use the time you have now to make and carry out a plan.
Maybe it’s refinancing your private student loans to secure a lower monthly payment. That way, come January, your total (private + federal) monthly student loan payment won’t be as high. Or maybe it’s enrolling in an income-driven repayment plan.
Whatever you decide to do, the sooner you get started, the better.
For more details about how the COVID-19 emergency has affected student loans, visit the Federal Student Aid website.
Compare the Best Student Loan Refinance Rates
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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.