February 04, 2021
At the beginning of the COVID-19 Pandemic, the Secretary of Education directed the office of Federal Student Aid to enact the following relief for federal student loans:
- Loan payments are suspended,
- Collection efforts are stopped on defaulted loans (including garnishments), and
- Loan interest rates are set to 0%.
These protections have been extended as the pandemic has continued and the new Biden administration seems to be extending these protections further. As of January 21, 2021, the Federal Student Aid office has the following announcement on their webpage: “COVID Emergency Relief Flexibilities Extended At Least Through Sept. 30, 2021. We will continue to update this page as more information becomes available.” Follow this page for more updates: https://studentaid.gov/announcements-events/coronavirus
What student loans are covered by these protections?
These protections cover all loans owned by the U.S. Department of Education: Federal Direct Loans, including direct subsidized and unsubsidized loans, direct PLUS loans for graduate students and parents and direct consolidation loans; FFEL (Federal Family Education Loan) Program Loans, and Federal Perkins Loans. These protections DO NOT cover private student loans, FFEL program loans that are owned by commercial lenders, and Federal Perkins Loans that are owned by the school you attended.
What does this mean for student loan borrowers?
This “pause” on federal student loans was enacted automatically and suspends payments through the end of the COVID emergency relief period. If you were on automatic payments for your student loan, these will cease until the end of this period. If you are able to, you can continue to make payments on your loans, which may enable you to repay them faster. If you wish to change the method of payment or your payment plan, you should contact your provider. Once the COVID relief period draws to a close, you may want to contact your provider to ensure you are set to resume payments.
What about Public Service Loan Forgiveness?
The months of the student loan “pause” due to the COVID emergency relief period will count toward Public Service Loan Forgiveness (PSLF) eligibility as long as you have direct loans that are not in default and you continue full-time work (at least 30 hours a week) for a qualifying employer during the period. Reduced work hours may impact your eligibility. You can meet the full-time work requirement by working for multiple employers, but they must be qualifying employers under the PSLF program. Even if you can afford payments during this time, if you are planning to apply for PSLF, you may want to save your money instead as the “pause” may reduce the amount you will have to repay. Additionally, if you made payments during the “pause”, you may request a refund and the payments will still count towards PSLF as long as all other requirements are still met. For more information: https://blog.ed.gov/2020/10/6-things-know-public-service-loan-forgiveness-covid-19-emergency/
There is no fee and no process to apply for the student loan “pause”. There is also no current coronavirus-related loan forgiveness for federal loans. If anyone contacts you asking for money to gain these benefits, it is a scam. Your loan provider should be able to provide you information about your loan free of charge.
What about private student loans and other loans not covered by these protections?
Private student loan lenders have responded in a wide variety of ways. If you are having trouble making payments on private student loans or other loans not covered by this relief, you should contact your lender to see if they can give you a break on your monthly payments or if they have other options to help you during these unusual times, including alternative payment plans. If you agree to make any changes to the terms of your loan, make sure you get the new arrangements in writing and ask how it will be reported to credit reporting agencies.