Millions were left out of work and saw their finances shattered as a result of the coronavirus outbreak. This has caused concern among many who are saddled with student loan debt. If you are one of them, you’ll be glad to know that the government has made moves to give people with federal student loans a break.
How the CARES Act Deals With Student Loans
On March 27 of this year, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) became official. Its overall goal was to give people relief in response to the pandemic, and one area where it aimed to do so was with student loans.
Unfortunately, the CARES Act does not provide relief for all student loans. The government must hold the loan. Specifically, it must be guaranteed or provided through the U.S. Department of Education to be eligible for relief.
If your loan qualifies, you won’t have to make a payment until September 30, 2020. This deferral began on March 13, and during it, there will be zero interest as well.
Loans that qualify for zero-interest loan deferral until September 30 include the following from the Department of Education:
- Direct loans
- Federal Family Education Loans (FFEL)
- Perkins loans
If you are unsure whether or not your loan qualifies for zero-interest deferral, contact your provider. It’s better to gain clarity via direct communication than to assume it qualifies and get hit with penalties later for non-payment.
If you do have a federally-funded loan (and you double-checked to make sure), you will not have to take any action to enjoy the suspended payments. Your federal loan provider will automatically suspend payments until September.
What to Do If the CARES Act Doesn’t Cover Your Student Loans
FFEL or Perkins loans that are commercially held will not enjoy the same relief benefits as federally-funded loans.
In the case of FFEL, three months of disaster forbearance is an option that could help. For those three months, your payments will be suspended. Your loans won’t affect your credit, either, as they’ll be in good standing. Interest will accrue during the three forbearance months, however.
If you find that your loans are not covered in any way by the CARES Act, get on the phone with your provider to see what your options are. It’s no secret that the coronavirus has created job and income loss, and student loan providers know this.
Although the relief available may not be as good as zero-interest deferral until September, you may be able to come up with an agreement with your provider. At the very least, it can provide some breathing room as you look for ways to pay your other, more urgent bills like rent and utilities.
How Your Employer Could Help
While the CARES Act won’t provide direct relief for student loans that are privately funded, it does make a push towards incentivizing companies to pay off the student debt of their employees.
In 2020, companies can make tax-free payments toward employee student loans for as much as $5,250. To see if you’re eligible for this repayment assistance, talk to your employer.