- Borrowers with loans owned by the U.S. Department of Education or through the Federal Family Education Loan (FFEL) Program automatically receive a new interest rate of 0% from March 13, 2020, through May 1, 2022.
- If you’re behind on a federal student loan, your wages, tax refund, and Social Security payments can’t be garnished.
- Borrowers who need relief on private student loans—or commercial student loans—may be eligible, but it isn’t as straightforward.
- During this pandemic-related forbearance, debt collectors may not try to collect payments on federal student loans.
- No student loan payments on federal loans are owed until after May 1, 2022.
Automatic Federal Student Loan Forbearance
The Coronavirus Aid, Relief and Economic Security ( CARES ) Act grants federal student loan borrowers automatic administrative patience if the U.S. Department of Education owns the loans. What does this mean ?
primitively passed on March 13, 2020, extended through Sept. 30, 2021, and again extended to Jan. 31, 2022—the CARES Act was extended once again on Dec. 22, 2021, until May 1, 2022. This still means :
- Your interest rate will drop to 0%.
- You don’t have to make payments.
- If you want to keep making full or partial payments during this time, you can.
- You won’t be charged any late fees.
- Interest will stop accruing.
- The interest you owed on March 12, 2020, will not be added to your principal balance.
- You don’t have to contact your loan servicer to request these benefits if you’re eligible for them.
When you log in to your scholar loan account or expect at your student loanword affirmation, it should show an interest rate of 0 % if you ‘re receiving the benefit. If your rate is not 0 %, double-check that your servicer has n’t made a mistake. here ‘s how to determine if you should be getting this rate .
The american Rescue Plan, passed by Congress and signed by President Biden in March 2021, includes a provision that student loanword forgiveness issued between Jan. 1, 2021, and Dec. 31, 2025, will not be taxable to the recipient role .
education Department–Owned Loans
If you have one of the following loans, there ‘s a estimable chance it ‘s owned by the U.S. Department of Education and that you qualify for 0 % interest :
- Defaulted and non-defaulted Direct Loans (including parent and graduate student PLUS loans)
- Defaulted and non-defaulted Federal Family Education Loan Program (FFELP or FFEL Program) loans owned by the U.S. Department of Education (ED)
- Defaulted FFEL Program loans not held by ED
- Defaulted and non-defaulted Federal Perkins Loans owned by the U.S. Department of Education (ED)
- Defaulted Health Education Assistance Loans (HEAL)
The first category, aim Loans, is a shot dunk. The Department of Education is constantly the lender. even so, your servicer may be one of the nine companies that collect student lend payments and handle administrative matters for the politics .
If You Do n’t Know Who Owns the Loan
The follow three loanword categories are not necessarily ED-owned. commercial lenders sometimes own FFEL and HEAL loans, and schools sometimes own Perkins loans. ( heal loans were discontinued in 1998, then if your loans are newer than that, you may not have hear of HEAL. ) That being said, on March 30, 2021, the Department of Education expanded its pause on union scholar loan concern and collections to include all default loans in the Federal Family Education Loan ( FFEL ) Program .
If you do n’t see that 0 % interest rate on your report, contact your scholar loanword servicer ( that ‘s the company you make your payments to ) and ask who owns your loans. If you do n’t want to call or email them, you might be able to find the information yourself by logging into your bill and looking for your loan details. Let ‘s say your servicer is Nelnet, one of the biggest student loan servicers. Within your Nelnet bill, you can click on “ loan details ” to see a list of all your loans. This list wo n’t show you who owns your loans, though. To get that information, you ‘ll need to pick one of your loans from the drop-down box .
Best-case scenario, your servicer discovers it has made a err and cuts your rate. You should always act as your recommend. student lend servicers have a poor reputation for acting in borrowers ‘ best interests. To be fair, why should they ? You are n’t their customer ; the government or the investors who own your loans are their customers. They ‘re basically acting as debt collectors for whoever owns your loans ; that ‘s how they earn money .
so if your servicer says you ‘re not eligible, do n’t take their parole for it. Do your own research to make certain. Besides logging in to your account at your servicer ‘s web site and poking around, you can besides get information about your loans from StudentAid.gov. If you do n’t have an report yet, spend a few minutes creating one. Once you ‘ve logged in, you can view the details of your loans. You might find details here that you could n’t find on your servicer ‘s site .
If the scholar loan holder is anybody other than the U.S. Department of Education or within the elongated Federal Family Education Loan ( FFEL ) program, the lend is not eligible for the CARES Act ‘s payment pause and matter to release.
The Confusing Case of FFELP Loans
about 6 million federal scholar loanword borrowers ca n’t get any relief from the CARES Act because a commercial lender holds their loans, according to calculations by Travis Hornsby, the fall through of Student Loan Planner, a caller that helps borrowers rigging scholar loan debt .
possibly you had Stafford loans, a type of FFELP loanword that has n’t been issued since they were replaced by direct loans in 2010. FFELP loans were federal loans, but they were issued by private lenders. Who owns them now ? sometimes, it ‘s the Department of Education—and that means you get the CARES Act relief. early times, it ‘s a commercial lender, and you wo n’t qualify for CARES Act respite .
Let ‘s say you ‘ve found the part of your servicer ‘s web site that says who owns your loans, and you see something like this :
- Current Owner: NELNET FEDERAL LOAN TRUST
- Guarantor: PA HIGHER EDUCATION ASSISTANCE AGENCY
Does “ Federal Loan Trust ” in the appoint mean the federal government—that is, the Department of Education—owns your loanword and you should be getting automatic administrative forbearance ?
unfortunately, the answer is no. “ If a Stafford FFELP lend is owned by Navient Federal Loan Trust, it is not owned by the U.S. Department of Education and consequently is not eligible for the requital pause and interest release, ” said Mark Kantrowitz, publisher and VP of inquiry for Savingforcollege.com and one of the nation ‘s leading experts on student loans. ( Navient left the Department of Education scholar lend program in September 2021. )
Read more: What Can You Do With a Mathematics Degree?
Why You Might not Get Interest-Rate relief
Loans like the one precisely described are known as securitized loans, which means “ the lender transfers title to the loans to a confidence and sells shares in the trust to investors, ” Kantrowitz says. “ The interest gross is used to make payments to the investors. Since the loans are held by the faith, the terms of the loans can not be modified unless the alteration is specifically allowed by the terms of the trust. thus, it is still a federal loanword, with all the benefits and terms intact, but it is not owned by the U.S. Department of Education. ”
This is the more complicate explanation as to why your sake rate is n’t 0 %. But there ‘s another flex : A guarantor is a company that reimburses the federal government for default scholar loans. In this encase, the guarantor is the Pennsylvania Higher Education Assistance Agency. PHEAA guaranteed more than $ 21 billion in loans as of June 30, 2020, according to one of its holocene fiscal statements .
May 1, 2022
The date sake will once again begin accruing on loans owned by the U.S. Department of Education or through the Federal Family Education Loan ( FFEL ) Program.
The guarantor acts as an mediator between the U.S. Department of Education and the lender, Kantrowitz said. If you default, your lender files a call with the guarantor. The guarantor pays the default option claim, transfers the loan to the Department of Education, and the guarantor becomes the servicer .
” If a loan has a guarantor, it normally is an FFELP loanword that is not held by the U.S. Department of Education, unless the loanword is in nonpayment, ” Kantrowitz said. “ then, FFELP loans that are in default are one category of ED-held loans eligible for the payment pause and interest release. ” Defaulting causes a bunch together of administrative headaches and fiscal consequences, both long and inadequate terminus, that you do n’t want to inflict on yourself. so rather of doing that, learn about your other options .
What to Do if the Education Department Does n’t Own Your Loans
Having private loans—or federal loans that are n’t owned by the Education Department—does n’t mean you ca n’t get stand-in if you ‘ve been affected by the pandemic .
Under a state-led enterprise, residents of California, Colorado, Connecticut, Illinois, Massachusetts, New York, New Jersey, Vermont, Virginia, and Washington are eligible for relief on scholar loans not held by the Department of Education. In these 10 states, you can get requital stand-in if your lend servicer is one of these companies :
other companies may be participating deoxyadenosine monophosphate well. This state-led payment relief is less generous than what ‘s available through the CARES Act, but it ‘s better than nothing. You can :
- Request temporary forbearance for 90 days
- Get relief from late fees
- Get relief from negative credit reporting and debt collection activities, including wage garnishment
Check Your State ‘s Website for Relief Options
Visit your state ‘s web site to see what relief lenders are providing where you live. Whether your state has come to an agreement with commercial scholar lenders or not, you can inactive visit your lend servicer ‘s web site to see what options they ‘re offering all borrowers, and you can besides call or email your servicer to find out what specific options may be available to you given your circumstances .
You ‘ll have to request aid if you want it ; only borrowers with Department of Education loans get automatic pistol aid. And in some cases, you might have to demonstrate that you ‘ve experienced economic asperity. You should besides know that there may be long-run consequences, such as paying more interest in the long run and pushing back the date when you ‘ll be student-debt-free .
Besides the possibilities described above, you may besides be able to request economic hardship or unemployment postponement. You may be able to switch to an income-based refund plan. You may besides be able to get a impermanent reduction in your concern rate or a loan alteration .
Another option, if you have federal loans that are n’t owned by the Department of Education, is loanword consolidation. It normally takes 4 to 6 weeks, once the application is received. It will get you the 0 % CARES Act rate, but it will besides cause you to lose any benefits provided by the lender, such as a lower interest pace. That means your post-consolidation rate, after the 0 % period ends, could be higher, Kantrowitz says .
Loan consolidation will restart the clock on your qualify payments if you ‘re on an income-driven refund plan.
The Bottom Line
future stimulation bills aimed at helping Americans hurt by the coronavirus pandemic might provide greater scholar loanword relief. For now, the options available are the ones described above, and last until May 1, 2022, under the CARES Act. Those are what you can act on if you need a break from your scholar loans .