Student loan relief during the COVID-19 pandemic
The CARES Act provides for the suspension of principal and interest payments on most Direct Loans and Federal Family Education Loans
Neither this article nor any information provided herein should be considered to contain legal advice or opinions. You should contact your legal counsel to obtain legal advice.
By Sue Jackson and Erin Robles
Student loan borrowers may qualify for temporary relief for those who have been impacted by COVID-19.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act that was recently signed into law includes provisions that provide relief to certain student loans that are currently federally owned.
The Act provides for the suspension of principal and interest payments on most Direct Loans and Federal Family Education Loans (FFEL) through September 30, 2020, with no late fees or financial penalties. Interest rates have automatically been set to 0% and will revert to your regular interest rate after September 30, 2020.
Although the suspension of payments is automatic, if you have set-up monthly automatic payment withdrawals you should contact your lender to confirm that the automatic withdrawals will be stopped. You still have the option to continue making monthly payments on your federal student loans.
With regard to the Public Service Loan Forgiveness program (PSLF), if you have a Direct Loan, the months when payments are suspended will count toward loan forgiveness as long as you continue to meet the other PSLF program requirements.
The CARES Act also suspends involuntary collections of defaulted federal student loans, including wage and tax refund garnishment until September 30, 2020. The Department of Education is relying on employers to make changes to the borrowers’ paychecks. If wages continue to be garnished from your paycheck, you should contact your employer. The Department of Education has also requested the U.S. Treasury to stop withholding money from those in default from federal income tax refunds, social security payments and any other federal payments.
The CARES Act provisions for student loans do not apply to all student loans (e.g. privately held student loans, some FFEL program loans owned by commercial lenders, and some Perkins Loans held by the institution attended). If you have questions about eligibility or need more information, you should contact your lender or loan servicer directly.
Federal Student Aid. Coronavirus and Forbearance Info for Students, Borrowers, and Parents.
About the authors
Sue Jackson is an attorney with Lexipol. She has 25 years of legal experience representing public entities including public safety entities in civil matters relating to negligence, civil rights, and employment law.
Erin Robles is an attorney with Lexipol. She has more than 20 years of legal experience representing local governments with a focus on public safety and labor and employment law.