Author: Ashley M. Securda, Esq., Partner
The Coronavirus Aid, Relief, and Economic Security Act, also known as the “CARES Act,” in its final version, was over 800 pages and contained various laws that impacted Americans nationwide.
Did you know that the CARES Act also may have impacted your federal student loans?
Federal Student Loans
First, it is of importance to note that the CARES Act only applies to federal loans owned by the Department of Education. Therefore, private student loans do not qualify for the benefits we are about to discuss.
Under the CARES Act, all federal student loans are to be suspended through September 30, 2020. This means that no payments will be due, no interest will be accumulated, and no penalties or late fees will be assessed. In addition, suspending your payments through September will not have a negative impact on your credit or impact any loan forgiveness programs you may already be enrolled in. Lastly, any and all collection efforts shall cease temporarily, including wage garnishments or any reduction in one’s tax refund due to unpaid and/or delinquent loans.
As of today, some federal student loan providers (i.e. the company that handles your loan(s)) are not yet set up to reflect the suspension of all federal student loan payments. They are expected to be in compliance by the end of the week. Therefore, if you need to suspend this month’s payment (which may be due in the beginning of the month), you need to call your loan provider to request the suspension of this month’s payment. Some loan providers have suspended all payments that are auto-debited and are allowing individuals to make payments manually only. Therefore, you may not need to take any action. However, you should check to see how your specific loan provider is handling your loans.
You can still make payments towards your student loans. All payments will go to principal only, which may be beneficial for some individuals who have trouble making a large impact on the principal amounts of their loans. Students who have recently graduated or who have been paying on their loans for a short period of time usually see the majority of their payments go to interest only. Therefore, if you can continue to make payments, it might be beneficial for you in the long run.
Federal student loan providers have until this Saturday, April 11, 2020, to inform all of their rights under the CARES Act. Furthermore, when your loan payments are supposed to be reinstated, loan providers must provide each individual with six (6) notices informing you when payments will resume.
Private Student Loans – What Can I Do with Them?
As previously mentioned, the CARES Act only applies to federal student loans owned by the Department of Education and therefore does not apply to private student loans. However, some private student loan companies are also providing temporary options for relief for those faced with unemployment or a decrease in their income during the pandemic.
Each and every loan provider is different. You should contact your loan provider to see what options you have, which may include: a temporary forbearance, making payments towards your interest only, or making partial payments temporarily.