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.

The federal government is taking steps to help student loan borrowers during the coronavirus pandemic. Under the federal stimulus plan, most student loan payments are suspended until September 30, 2020, with no penalty, and interest won't accrue during this time.

If this temporary reprieve isn’t enough, 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

The federal “Coronavirus Aid, Relief, and Economic Security Act” or the “CARES Act” (H.R. 748), which President Trump signed into law on March 27, 2020, suspends payments on federal student loans held by the U.S. Department of Education for six months. So, you can stop paying your qualifying student loans until September 30, 2020.

The law, however, doesn't provide 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. While Senate and House Democrats pushed for widespread student loan cancellation, forgiveness didn't get included in the final bill.

No Interest Accrual

Under the CARES Act, interest won't accrue on a loan for which payment was suspended. So, no new interest will accrue on your qualifying federal student loan balance through September 30, 2020.

You also won't be charged late fees or penalties for nonpayment.

Collection Actions, Wage Garnishments, Treasury Offsets

The CARES Act also stops collection actions, wage garnishments, and Treasury offsets, and prohibits negative credit reporting during the coronavirus national emergency.

How Public Service Loan Forgiveness and Loan Rehabilitation Are Affected

Even though payments will be suspended, those six months will still count as qualifying payments for the purposes of student loan forgiveness programs, including Public Service Loan Forgiveness (PSLF). Keep in mind that if you’re hoping to qualify for the PSLF program, you should complete and submit an Employment Certification Form to the Department of Education annually and whenever you change employers to make sure you’re on track to receive forgiveness. You can also use this tool to get assistance in filling out the required forgiveness forms.

Also, borrowers in default will have their six months of suspended payments count towards the nine months needed for loan rehabilitation.

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 that’s due on the loan. So, these six months are 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 period 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 through September 30, 2020.)

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), Pay As You Earn Repayment Plan (REPAYE), Income Contingent Repayment Plan (ICR), and Income Based Repayment 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.” For tips on where to start when selecting a plan, see How to Choose a Student Loan Repayment Plan.

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 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.

If you have private student loans, call the lender to find out what options, if any, are available to help you through this difficult time.

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