Resources for student borrowers during COVID-19

More details on your student loan options during COVID-19

COVID-19 Interest Waiver and Payment Suspension

The recently signed CARES Act suspends payments and waives interest for federal student loans held by the U.S. Department of Education through September 30, 2020.  For each month that payment is suspended, the payment will be treated as if it had been made for the purpose of reporting to the credit reporting agencies.  The U.S. Department of Education began waiving interest on federal student loans on March 13, 2020, but the payment suspension and credit reporting benefit went into effect with the signing of the CARES Act on March 27, 2020.

If borrowers continue making payments during the COVID-19 interest waiver and payment suspension period, those payments will be fully applied to loan principal, once any interest that was outstanding as of March 13, 2020 is paid off. For borrowers seeking loan forgiveness or to rehabilitate their defaulted loans, the CARES Act states that each month a payment is suspended between March 27, 2020 and September 30, 2020 will be counted as if a payment had been made for the purpose of any loan forgiveness or rehabilitation program

Qualifications for COVID-19 Interest Waiver and Payment Suspension

Please note that certain types of federal student loans are not eligible for the COVID-19 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 for the interest waiver 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 associated with income-driven repayment, 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 can still 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 COVID-19 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 COVID-19 interest waiver and payment suspension, rather than temporarily stopping payments, you may wish to consider applying for an income-driven repayment plan.  Borrowers can apply for an income-driven repayment plan through the U.S. Department of Education’s website: studentaid.gov.  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 an income-driven repayment plan.  If borrowers do not currently have taxable income, they do not need to provide any proof of income with their income-driven repayment application.   

Borrowers who are already enrolled in an income-driven repayment plan can also seek a recalculation of their monthly payment amount if they have experienced a change in income.  

Defaulted Federal Loans

Under the CARES Act, involuntary collection activity will cease on defaulted federal student loans through September 30, 2020, including wage garnishment, social security benefit offset, and tax refund interceptions. Additionally, payments are suspended for borrowers enrolled in rehabilitation plans.

  • 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 September 30, 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 COVID-19 interest waiver and 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.

Other Resources

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. 

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