How to Manage Your Federal Student Loans During the Coronavirus Outbreak

Learn what to do if you’re having trouble paying your federal student loans due to COVID-19.

On his first day in office, President Joseph R. Biden, Jr. issued several executive orders, presidential memoranda, and agency directives. One directive instructed the U.S. Department of Education to extend the existing payment suspension and interest waiver for most federal student loans through at least September 30, 2021. The federal Coronavirus Aid, Relief, and Economic Security (CARES) Act initially set up this student loan payment suspension.

In response, the Education Department announced it would continue the pause on federal student loan payments and collection actions at President Biden's request and keep borrowers' interest rate at 0%. But if this temporary reprieve isn’t enough and you still need help with your payments once the suspension ends, you might be able to get a more permanent solution by:

  • requesting a deferment or forbearance
  • changing your repayment plan, or
  • looking into whether you might qualify for loan forgiveness.

Federal Student Loan Payments Suspended During the Coronavirus Outbreak

Again, the federal CARES Act initially suspended payments for federal student loans held by the U.S. Department of Education for six months, from March 13, 2020, until September 30, 2020. A presidential memorandum extended the suspension of federal student loan payments through December 31, 2020, and also included an interest waiver through this date. Then, former U.S. Secretary of Education Betsy DeVos announced that the federal student loan payment suspension and interest waiver would continue through January 31, 2021. When President Biden took office, he extended the suspension through September 20, 2021.

But none of these actions provided for student loan forgiveness. So, the government won't make your student loan payments during this period—it's more like a pause in your repayment period.

No Interest Accrual

Interest won't accrue on a loan for which payments were suspended. You also won't be charged late fees or penalties for nonpayment.

Which Loans Qualify for Relief

The suspension and interest waiver apply to Federal Direct Loans and Federal Family Education Loans (FFELs), but only FFELs that the U.S. Department of Education owns—not FFELs held by other entities. Borrowers with Perkins Loans held by entities other than the Department of Education also aren’t covered.

Private student loan borrowers don't get any relief either. Though, some states, like California, Colorado, Connecticut, Illinois, Massachusetts, New Jersey, Vermont, Virginia, Washington, and New York, as well as the District of Columbia, have reached agreements with servicers to help borrowers who don't have federal student loans.

Collection Actions, Wage Garnishments, Treasury Offsets, Credit Reporting

Collection actions, wage garnishments, and Treasury offsets for defaulted federal student loans are also paused during the suspension period.

How Public Service Loan Forgiveness and Loan Rehabilitation Are Affected

Suspended payments will likely count as qualifying payments for the purposes of student loan forgiveness programs, including Public Service Loan Forgiveness (PSLF). Also, borrowers in default will probably have their suspended payments count towards the months needed for loan rehabilitation. While the Department of Education hadn't issued guidance as of late January 2021 addressing these topics, the Trump administration provided these benefits during previous student loan payment suspensions. Biden’s suspension probably will include them too.

What Happens If You Keep Making Payments

You can choose to continue to make your payments. Because the interest is set at 0% during this time, the full amount of the payments will go toward paying down the principal due on the loan. So, making payments during the suspension is a good opportunity to reduce your overall student loan balance if you can afford to keep paying.

Long-Term Options for Managing Your Debt

If you’re worried about making your federal student loan payments beyond the suspension, consider applying for a deferment or forbearance, changing your repayment plan, or finding out whether you might qualify for loan forgiveness.

Applying for a Deferment

With a deferment, your loan payments are postponed for a set amount of time—up to three years in the case of an economic hardship. No interest accrues on subsidized loans, including Federal Perkins Loans, Direct Subsidized Loans, Subsidized Federal Stafford Loans, the subsidized portion of Direct Consolidation Loans, and the subsidized portion of FFEL Consolidation Loans.

Requesting a Forbearance

With a forbearance, your loan payments are postponed or reduced, and interest normally continues to accrue. (But interest won’t get tacked on to your loan when the interest waiver is in effect.)

Changing Your Repayment Plan

You could also find out if you qualify for another repayment plan that will reduce your monthly payments. Income-driven repayment plans, like the Pay As You Earn Repayment Plan (PAYE), Revised Pay As You Earn Repayment Plan (REPAYE), Income-Contingent Repayment Plan (ICR), and Income-Based Repayment (IBR) Plan, are available for federal student loans. If you’re eligible, your monthly payment is based on 10-20% of your discretionary income, and the remaining balance is forgiven after you make 20-25 years of payments.

While many repayment options are available to federal student loan borrowers, the trick is figuring out which you can choose from and, of those, which is best for your situation. To find out which types of loans qualify for each of the repayment options, and learn about eligibility criteria, see the U.S. Department of Education’s website. To apply for a different repayment plan, go to StudentAid.gov/idr, click on “Apply Now,” and then start the application by clicking on the button next to “Recalculate my monthly payment.”

Looking Into Student Loan Forgiveness

If you’re eligible, you can eliminate your federal student loans through a loan cancellation program, like PSLF or borrower defense to repayment. To qualify for a particular program, you'll have to meet specific criteria, take certain steps, and meet various conditions.

Getting Help With Your Federal Student Loans

To learn more about repayment options for federal student loans during the coronavirus national emergency, visit the U.S. Department of Education’s Federal Student Aid coronavirus website. You can also call your loan servicer. If you have a Federal Perkins Loan, contact your school.

To get assistance in dealing with your servicer or to get help understanding the different repayment, deferment, forbearance, and forgiveness options for federal student loans, consider consulting with a student loan attorney or debt negotiation attorney who deals with student loans.

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