If you don’t have access to federal student loan relief under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, you can most likely still get help under a state-specific agreement or a lender-offered program.
Several states have reached deals with various servicers to help student loan borrowers who've been affected by the coronavirus, but who aren’t covered by the CARES Act. And if you live in a state that's not a party to such an agreement, most private lenders offer payment help to borrowers who're facing a financial hardship due to the COVID-19 outbreak.
The federal CARES Act suspends payments on federal student loans held by the U.S. Department of Education for six months, until September 30, 2020. Federal student loan borrowers are automatically entitled interest-free forbearance until this time. (So, your loan balance won’t go up during the suspension.)
The CARES Act also prohibits collection actions, wage garnishments, and Treasury offsets during this time frame and, if your loans qualify, ensures that your credit won’t take a hit as a result of the suspension. (To learn more about how the CARES Act impacts students, read Student Loan Relief Under the Federal CARES Act and How to Manage Your Federal Student Loans During the Coronavirus Outbreak.)
The CARES Act applies to Direct Loans, as well as Federal Family Education Loan (FFEL) program loans that are owned by the U.S. Department of Education. It doesn’t, however, apply to private student loans, nor does it pertain to commercially-owned FFELs. Borrowers with Perkins Loans held by entities other than the Department of Education, like the institution you attended, also don’t get relief under the CARES Act.
Because the CARES Act didn’t provide relief for private student loans or commercially-held federal loans, states are filling in this gap. California, Colorado, Connecticut, Illinois, Massachusetts, New Jersey, New York, Vermont, Virginia, and Washington, as well as the District of Columbia, have all reached agreements with specific student loan servicers to offer forbearances of at least 90 days for private student loans and commercially-held federal loans. If you live in one of these states and have a participating servicer (check the links above to get information about the different state agreements), you’re eligible for this relief. As part of the agreements, servicers have also consented to waive late fees, temporarily stop negative credit reporting, and pause debt-collection lawsuits.
Don’t just stop making your payments, though. Borrowers have to contact their student loan servicer to request help; explain your financial situation and how the COVID-19 crisis has impacted you. This contact requirement is a significant difference between the state agreements and the CARES Act. Under the CARES Act, payment suspensions are automatic.
Other states have temporarily suspended all wage garnishment actions or suspended all collection actions on debts, including student loans. Check the official governor’s website in your state to find out if your state has taken either of these or other steps to help student loan borrowers. Look for press releases, executive orders, and official proclamations related to COVID-19.
If you live in a state or have a servicer that isn’t part of a student loan agreement, private lenders typically offer assistance options, like short-term forbearances, fee waivers, lower interest rates, and interest-only payments. Contact your servicer to find out what alternatives the lender offers. Before you agree to a particular relief option, verify the terms, such as whether you’ll have to pay fees and exactly how long the program lasts. Make sure you get this information in writing before you enroll in the program. Then, get confirmation that you’re enrolled.
Also, be aware that if you have good credit, you might be able to refinance your loans with a new lender. If you can lower your current interest rate, you might be able to save a substantial amount of money. Your new lender might also offer more alternatives than your current lender if you eventually have trouble making the payments.
If you live in a state with relief options but have difficulty getting assistance from your servicer, contact your state Attorney General’s office and the Consumer Financial Protection Bureau. Also, your state could have a consumer protection office, department of banking, or student loan advocate (typically called an “ombudsman”) who might be able to help you.