Student Loan Relief Through the CARES Act
Congress’ $2 trillion-dollar stimulus package is expanding the relief on student loan payments, for some.
Borrowers struggling to make payments as COVID-19 cripples parts of the U.S. economy have received an extension on their forbearance. Under the new stimulus package that passed through the House today, March 27th, certain federal student loans will have their rates reduced to 0% for the next six months (through September 30th 2020).
What you need to know:
#1: Payment suspension applies only to loans held by the Department of Education.
Perkins Loans, FFEL loans held by a bank or another financial institution, and private student loans are not eligible.
#2: The suspension of payments is automatic – no need to contact your student loan servicer to ask for this forbearance.
Though I recommend logging into your account to ensure that you see a $0 payment due.
#3: There’s no penalty to the borrower for deferring the principal and interest payments.
#4: Since no payment is required during this time, any payments made will go directly to the principal to further pay down the remaining loan balance!
#5: No impact on PSLF. Suspended payments will actually be treated as regular payments made by the lienholder toward Public Service Loan Forgiveness (PSLF).
The same holds true for borrowers that went into default and are currently doing loan rehabilitation.
#6: Involuntary collection of defaulted student loans, including claiming tax refunds and wage garnishment, will also be suspended.