Docupop would like to wish you the utmost health and wellness during this unusual time. With the safety of our readers remaining top priority, we encourage you to follow the guidelines set by the CDC to protect yourself from the spread of the Coronavirus. This includes washing your hands, practicing social distancing, and calling your healthcare provider if you are feeling unwell or believe you may have contracted the virus, officially known as COVID-19.
In addition to the new state mandates put in place to stimulate public safety, the recently-passed Coronavirus Relief Bill, also referred to as the CARES Act, delegates over 2 trillion dollars in funding to ideally help stimulate the economy. This includes an automatic hold placed on nearly all federal student loans until December 31st, 2020. Here’s what you need to know.
How the CARES Act Impacts Student Loans:
- Effective retroactively from March 13th, 2020 – December 31st, 2020, the majority of federal student loan payments will be placed on hold.
- Interest rates have also been reduced to 0%, and will not accrue during this time.
- This mandate will be automatic – meaning no action is needed from borrowers to stop their loan payments.
- Billing and account updates will vary depending on the servicer. It could take several weeks or more for some servicers to reset their billing systems.
- While you are not required to make payments during this time, if you would like to continue to do so, just log in to your servicer monthly to submit your payment. Once the suspension is lifted, you will not be required to make up a lump sum payment of the months that were missed, just pick back up at your regular payment before the suspension was in place.
Loans That Qualify For CARES Act Relief
Luckily, most (but not all) federal student loans qualify for CARES Act relief. That being said, it’s important to be aware of which type of loan(s) you have before you stop making payments. The following loans all fall under the CARES Act relief plan:
- Direct Loans
- Perkins Loans owned by the U.S. Department of Education
- Federal Family Education Loans (FFEL) owned by the U.S. Department of Education
If your loans do not fall under one of the categories above, and you are experiencing a financial hardship due to the Coronavirus outbreak, you may have the option to file for a forbearance or deferment. Depending on the specific type of loan you have, there may still be programs in place for borrowers who lost their job or got furloughed due to COVID-19.
What About Private Student Loans?
Private student loans are not issued or collected on by the federal government. Because of this, they will not fall under the CARES Act. The exact options you may qualify for will vary from one lender to the next. If you have private loans and need help with your payments, contact your lender to see what, if any, relief options they may offer.
Can I Still Qualify for Forgiveness?
Good news. According to the Department of Education, borrowers working towards general forgiveness on an income-driven plan will still have the months during the suspension period qualify towards their forgiveness term.
If you are working towards Public Service Loan Forgiveness, or are interested in the forgiveness benefits offered to qualifying borrowers under PSLF, the CARES Act payment suspension period will also still count as time served under the program as long as you remain employed full-time at a qualified employer during this time frame.
Reduced Working Hours and PSLF
Unfortunately, there is an exception to the PSLF forgiveness outlines above. If your employment status changed due to the COVID-19 outbreak or if your hours have been reduced to working less than 30 hours a week, the months where you do not meet the necessary work requirements will not count towards your PSLF qualified payments.
As disappointing as this might be, it doesn’t eliminate your chances of getting your debt forgiven in the future. Since you do not have to make consecutive payments to qualify for PSLF, you may be able to pick up right where you left off once you’re back to working full-time for a qualifying employer.
Learn About Your Unique Loan Situation
Every student loan situation is different and your unique repayment plan may or may not be affected by the updates above. If you have any questions or concerns regarding the impact these changes may have on your student loans, Docupop’s Member Success Team is standing by to help at (866) 884-5021. From our families to yours, take care.
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