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What you need to know about the CARES Act and your student loans

Update: The Department of Education has published new guidance on a Presidential Memorandum extending the CARES Act’s student loan relief until  December 31, 2020. More detail on the relief is available below. 

The CARES Act provides relief to borrowers repaying certain types of federal student loans. Importantly, these provisions only apply to Direct loans and Federal Family Education (FFEL) Loans currently owned by the U.S. Department of Education. The CARES Act does not apply to FFEL loans held by banks or other commercial lenders or to Perkins loans. 

Not sure what type of loan you have? You can look up this information at the National Student Loan Data System (NSLDS) website or by calling 1-800-4-FED-AID. If you choose to use the website, you’ll need your FSA ID username and password to log in. You’ll receive a warning message and can click “Accept.” You will then see “My Aid” to the left above the blue and green circle(s) with your loan and/or grant amounts. Click “View Details” to the right above those same circles. You will now be at the “Aid Summary” screen. Scroll toward the bottom until you see “Loan Types.” Click on each loan type to see what kind and how many loans you have, as well as the current owner of each loan. 

The CARES Act, along with the Department’s earlier guidance, provides the following automatic benefits for Direct and FFEL loans owned by the Department: 

  1. SUSPENDS ALL PAYMENTS: The CARES Act suspends all payments, including automatic payments set up through recurring ACH transfers from your bank account. This includes payments you have already made since March 13, 2020. Those payments will be applied to your principal balance, unless you contact your servicer to request a refund (see this template). You can continue to make payments towards your principal for the next six months, if you wish to do so. To ensure that any payments are applied to your principal and not to interest that has already accrued, you should email your loan servicer first, using this template as a guide. As always, save a copy of the email. You should then follow up with a phone call if you do not hear back within 48 hours.  

  1. WAIVES ALL INTEREST: The CARES Act also waives all interest on Direct and FFEL loans currently owned by the Department. President Trump had announced a prior waiver of interest effective March 13, 2020. 

  1. COUNTS ALL SUSPENDED PAYMENTS: The CARES Act makes clear that borrowers will continue to accrue qualifying payments during this six-month period. Suspended payments will count towards general loan forgiveness after 20 or 25 years of making income-based repayments, Public Service Loan Forgiveness (assuming the borrower continues to work in qualifying, full-time employment during this timeframe), and loan rehabilitation (for borrowers attempting to resolve defaulted federal student loans). The Act also specifies that suspended payments will be reported to national credit bureaus as if they had been made on time and in full. 

  2. EXTENDS DEADLINES TO RE-CERTIFY INCOME FOR INCOME-DRIVEN REPAYMENT PLANS: For borrowers enrolled in income-driven repayment plans whose annual certification of income and family size is due before September 30, 2020, the Department  previously extended that deadline by six months. The Department has not made clear whether it will provide additional extensions for borrowers whose annual certifications are due between September 30 and the end of the year. 

  1. STOPS ALL INVOLUNTARY COLLECTION OF DEFAULTED LOANS: The CARES Act suspends all involuntary collection—including wage garnishment, seizure of tax refunds, or seizure of other federal benefits, such as Social Security—of defaulted Direct and FFEL loans currently owned by the Department.

  1. CANCELS DIRECT LOANS FOR CURRENT STUDENTS WHO WITHDRAW: If you are currently attending school and you decide to withdraw as a result of the Covid-19 crisis, the CARES Act specifies that the Department must cancel any Direct loans associated with the period in which you withdrew.  

The Department should have communicated all of these changes to you by April 10, 2020. The Department is now working with your loan servicer to communicate the extension of student loan relief through December 31, 2020. You should watch your email and/or snail mail for more information. You should also stay vigilant about monitoring any changes to your federal student loan balance throughout this period. If you notice a discrepancy, reach out to your loan servicer first to resolve it. If you cannot resolve the discrepancy with your servicer, call the student loan ombudsman at the U.S. Department of Education or the ombudsman in your state, if you have one.

Please be aware that this information is provided for informational purposes only and neither constitutes legal advice nor creates an attorney-client relationship. We encourage any individual with questions about personal circumstances to consult an attorney.