In an effort to support families and businesses affected negatively by the COVID-19 shutdowns, the government passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The two trillion dollar package included many different types of relief, including relief for many borrowers with federal student loans. In fact, student debt relief under the CARES Act is quite far-reaching. These are some of the benefits student borrowers with qualifying loans can expect from the CARES Act.
What Are The Benefits Of The CARES Act For Student Loans?
While the law went into effect on March 27, 2020, the benefits are retroactive to the date of March 13, 2020. At least as far are the automatic student loan forbearance issued as part of the CARES Act. Effective dates for the forbearance extend through September 2020. During this time, interest is suspended on student loans as well. While President Trump issued a presidential directive offering forbearance to federal student loan borrowers, the forbearance wasn’t automatic, and borrowers were required to apply for it.
The CARES Act automated the process, so students do not have to apply for the forbearance and added benefits for borrowers seeking loan forgiveness through PSLF by allowing the months of the forbearance to count as payments toward their eligibility as long as they remain employed in a qualifying organization during that time.
However, those working toward PSLF will not be eligible to have their forbearance months count toward their payment months if they were operating under reduced hours and therefor no longer employed full time or lost their jobs as a result of the pandemic.
Are All Student Loan Borrowers Eligible?
Unfortunately, this only extends to specific student loans, and not everyone will qualify for the automatic forbearance. The following types of student loans are ineligible for the CARES Act protections.
- Private student loans.
- Federal Family Education Loan (FFEL) or Federal Perkins loans not owned by the Department of Education.
The forbearance policy only applies to students who have student loans currently owned by the Department of Education.
Other Details You Need To Know
If you have set up auto-debits to repay your student loans each month, the DoE is suspending those payments through September 30, 2020. They will begin again on their due dates in October 2020. No action is required, on your part, to suspend those payments. If you choose to continue making payments during this time, you will be paying no interest.
You can either prefer to continue paying your usual amount, making more significant headway toward paying off your student loans, or pay a lesser amount of your choice with every payment reducing your principal borrowed amount. If you wish to continue making auto-debit payments, you must go through the organization that services your student loans and officially opt-out of the forbearance.
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