Federal Student Loan Payments will be Suspended Through Sept. 30 Due to the Coronavirus Pandemic

Americans will get a six-month reprieve from federal student loan payments. The President signed the CARES Act addressing the coronavirus pandemic on Friday.

Under the $2 trillion coronavirus relief bill passed through Congress and signed by the President on Friday, lenders must stop all payments for federally held student loans through Sept. 30. During that time, borrowers do not have to make payments and interest rates are set to 0% for six months.  Furthermore, interest will not accrue on the loans. Nonpayment during that period nonpayment on student loans cannot be used to affect credit scores or a person’s qualification for loan forgiveness. According to the bill’s text, “each month for which a loan payment was suspended” will be treated as if “the borrower of the loan had made a payment.”

The bill will also suspend any wage garnishment or tax refund reduction for people who have defaulted on their federal student loans. It does not, however, have any effect on private student loans, though the vast majority of the $1.64 trillion in student loan debt in the United States are federal. Private loans made up about 12% of all education loans in 2018–2019, according to the College Board.

What Borrowers Should Do

Borrowers should log-in to their student loan servicer’s website portal to access their account. From there, it should state that there is no payment due. If the system is still showing that a payment due, you contact the servicer immediately to confirm that a payment is not required.

Lenders are required to notify borrowers that their federal student loan payments were suspended within 15 days. Beginning Aug. 1, lenders are also required to notify borrowers when their student loan payments will again be due for payment.

As stated above, borrowers with Perkins Loans and Federal Family Education Loans not owned by the U.S. Department of Education are not eligible for automatic forbearance under the new law. You must apply for traditional forbearance with your servicer or at your school if you have Perkins loans — to get a relief from payments.

Public Service Loan Forgiveness Program and Student Loan Rehabilitation

During the next six months, borrowers will still have the opportunity to continue to make payments.  All payments will be applied 100% towards the principal on their loans, should they wish to do so.

Suspended Payments Will Count Toward Public Service Loan Forgiveness (PSLF) and Loan Rehabilitation

Participants in the Public Service Loan Forgiveness Program (PSLF), which is a federal program that many borrowers utilize to have their student loan balances forgiven. Under the PSLF, borrowers with direct loans who work in the public sector and make 120 qualifying monthly payments will have their loans forgiven, tax-free.

The stimulus relief package suspended payments are to be treated as regular payments toward Public Service Loan Forgiveness. This is an important measure that ensures borrowers who have been working toward these programs will stay on track toward the forgiveness of their loan.

The same rule applies to individuals currently participating in student loan rehabilitation, during which borrowers with defaulted student loans are required to make nine out of 10 consecutive monthly payments to pull their loans out of default. In the same vein as the PSLF provision, suspended payments will be treated as regular payments during the rehabilitation period. The U.S. Department of Education will treat the six-month payment suspension as if the borrower continued making regular payments toward rehabilitation.


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