COVID-19 Interest Waiver and Payment Suspension
The CARES Act suspended monthly payments, waived interest, and stopped collections for federal student loans owned by the U.S. Department of Education through September 30, 2020. On August 21, 2020, the Secretary of Education announced that she was extending these benefits through December 31, 2020. According to the Secretary, suspended loan payments will continue to count towards loan forgiveness under the Public Service Loan Forgiveness program and income-driven repayment plans.
The payment suspension is automatic. However, if borrowers elect to continue making payments during the suspension, those payments will be fully applied to loan principal, once any interest that was outstanding as of March 13, 2020 is paid off.
For more details, please review the U.S. Department of Education’s FAQ.
Qualifications for Interest Waiver and Payment Suspension
Please note that certain types of federal student loans are not eligible for the interest waiver and payment suspension, including privately-owned loans made through the Federal Family Education Loan (FFEL) Program and Perkins loans owned by schools. While these loans may become eligible if they are consolidated into the Direct Loan Program, there may be certain disadvantages to consolidation. For example, consolidation restarts the clock on loan forgiveness under income-driven repayment plans, typically increases the total cost of a loan by extending its repayment term, and could result in a slightly higher interest rate. On the other hand, consolidating FFEL and Perkins loans into the Direct Loan Program may provide access to more affordable income-driven repayment plans.
Borrowers with privately-owned FFEL or Perkins loans who do not consolidate into the Direct Loan Program may still be able to temporarily stop their student loan payments through an economic hardship deferment or disaster forbearance, though in most cases, interest will accrue during the deferment or forbearance period. Contact your loan servicer to determine if your loans are eligible for the interest waiver and payment suspension, and to explore what other options may be available to you, including income-driven repayment plans.
Income-Driven Repayment Options
Regardless of whether your federal student loans are eligible for the interest waiver and payment suspension, you may wish to consider applying for an income-driven repayment plan. Borrowers can apply for income-driven repayment plans through the U.S. Department of Education’s website: studentaid.gov. If you are eligible for the interest waiver and payment suspension and apply for an income-driven repayment plan, your payments will remain suspended, and the non-payment months will count towards loan forgiveness under your income-driven plan.
Income-driven repayment plans tie your loan payment to your income and offer the possibility of loan forgiveness after 20 or 25 years of qualifying payments. Low-income borrowers may pay as little as $0 per month under income-driven plans. If borrowers do not currently have taxable income, they do not need to provide any proof of income when applying or annually recertifying for income-driven repayment.
Borrowers who are already enrolled in an income-driven repayment plan can also seek an immediate recalculation of their monthly payment amount if they experience a loss of income.
Defaulted Federal Loans
Under the CARES Act, involuntary collection activity ceased on defaulted federal student loans held by the U.S. Department of Education through September 30, 2020, including wage garnishments, social security benefit offsets, and tax refund interceptions. Additionally, payments were suspended for borrowers enrolled in rehabilitation plans. On August 21, 2020, the Secretary of Education announced that she was extending all of these benefits through December 31, 2020.
- If your federal tax refund was in the process of being withheld on or after March 13, 2020, your federal tax refund will be returned to you.
- Similarly, any portion of your Social Security benefit that was in the process of being offset on or after March 13, 2020 will be returned to you.
- If your wages continue to be garnished after March 13, 2020, you should contact your employer’s human resources department. If the U.S. Department of Education receives funds from your paycheck after the wage garnishment should have stopped, it will refund your garnished wages to you.
- Payments are suspended until December 31, 2020 for borrowers enrolled in rehabilitation plans, and each month for which a payment is suspended will be counted as if you made a payment for the purpose of the rehabilitation plan.
For more details about the U.S. Department of Education’s stoppage of involuntary collection, please review the U.S. Department of Education’s FAQ.
Private Student Loans
Non-federal loans made by private lenders are not eligible for the U.S. Department of Education’s interest waiver, payment suspension, or stoppage of involuntary collection. Private loan borrowers who are struggling to afford their student loan payments should contact their loan servicers to determine what options are available to postpone or reduce payments. Many lenders are offering relief to borrowers affected by the COVID-19 crisis.
The Attorney General’s Student Loan Assistance Unit is available to help borrowers explore repayment options, including options to temporarily stop making student loan payments. The Attorney General’s Office also continues to advocate for more relief for struggling student loan borrowers.