Student Loan Changes During COVID-19
Thursday, Jul 2 2020
With unemployment levels rising and many employers cutting work hours, lots of college grads are now struggling to meet their student loan payments. Thankfully, the federal government has passed legislation to ease this burden. We have the info you need to navigate student loan changes during COVID-19
All You Need to Know About Student Loan Changes During COVID
As part of The Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) all federal student loan payments are suspended, interest-free, through Sept. 30, 2020.
The suspension applies to all federal student loans owned by the Department of Education as well as some Federal Family Education Loans (FFEL) and some Perkins loans. Students do not have to take any action or pay any fees for the suspension to take effect.
Additionally, during the suspension period, the CARES Act does not allow student loan servicers to report to the credit bureaus borrower nonpayments as missed payments. Therefore, the suspension should not have a negative effect on borrowers’ credit scores.
If you’re not sure whether your student loan is federally owned, you can look it up on the Federal Student Aid (FSA) website. Be sure to have your FSA ID handy so you can sign in and look up your loans. You can also call your loan servicer directly to clear up any confusion on student loan changes during COVID.
Here is the contact information for federal student loan servicers:
FedLoan Servicing (PHEAA): 1-800-699-2908
Granite State — GSMR: 1-888-556-0022
Great Lakes Educational Loan Services, Inc.: 1-800-236-4300
OSLA Servicing: 1-866-264-9762
Suspended payments count toward Public Service Loan Forgiveness and loan rehabilitation.
Public Service Loan Forgiveness (PSLF) is a federal program allowing borrowers to have their student loans forgiven, tax-free, with the stipulation that they work in the public sector and make 120 qualifying monthly payments. Disruption of these 120 payments can disqualify a borrower from the program.
Suspended payments will be treated as regular payments, according to the CARES Act. This ensures that borrowers who have been working toward these programs will not lose the progress they’ve made toward loan forgiveness.
The same rule applies to individuals participating in student loan rehabilitation. Borrowers with defaulted student loans must make nine out of 10 consecutive monthly payments to pull their loans out of default.
Some states and private lenders are offering student loan aid for struggling borrowers.
If you have a private loan, there are options. Some options include loan deferment or forbearance. If you are in need of such assistance, contact your lender directly to discuss your options.
Consider an income-driven repayment plan.
If you have a FFEL that is ineligible for suspension, you can lower your monthly payments by enrolling in an income-based repayment plan. This adjusts your monthly student loan payment amount according to your discretionary income. Other lenders offer similar plans, often referred to as income-driven repayment plans.
If your salary was cut as a result of COVID-19, or you are currently unemployed, these plans can provide relief by making your monthly payments more manageable.
Employers can contribute toward employees’ student loan debt for temporary tax relief
The federal government offered temporary tax relief for employers contributing up to $5,350 toward their employees’ student loan payments. This benefit is in effect until Jan. 1, 2021.
If you don’t qualify for the student loan payment suspension, you can try speaking with the HR department to find out how they can help you with your student loan debt at this time.