How COVID-19 impacts student loan repayments
The CARES Act is providing temporary student loan forbearance.
If you have student loan debt and are currently having a hard time making your payments, the CARES Act can help provide temporary relief through August 31, 2022.
What is the CARES Act?
The Coronavirus Aid, Relief and Economic Security Act, also known as the CARES Act, is an economic stimulus package that was passed in March 2020, in response to COVID-19. It was created to provide emergency assistance and health care response for individuals, families and businesses affected by the COVID-19 pandemic. One of the provisions of the Act aims to alleviate the financial burden for those with student loans by pausing the collection of federal student loans and lowering the interest rate to 0%.
Which student loans are affected by the CARES Act?
Are all student loan repayments on hold? Not exactly. The pause on collection and 0% interest rate applies only to student loans owned by the U.S. Department of Education — direct loans, direct consolidation loans and PLUS loans are all affected by the changes. Federal Perkins Loans and some Federal Family Education Loans (FFEL) that are held by the Department of Education, not those held by commercial lenders or educational institutions, are affected by the automatic suspension of collection and the reduction in interest rate as well.
Are private student loans on hold?
No. If your loan is owned by the school you attended or a commercial lender, you may still have to make regular payments, and the normal interest rate still applies. If you're not sure who owns your loans, consult a list of loan servicers for loans owned by the Department of Education on their website.
Relief for borrowers in default
The CARES Act also provides relief for borrowers who are in default on their federal student loans. From March 13, 2020, through May 1, 2022, the government is not garnishing income from borrowers in default. As is the case for all eligible borrowers, your student loans won't accrue interest during this period.