With the passing of the CARES Act, a $2 trillion dollar stimulus package, there was some big news for student loan borrowers. To help the economy weather the storm that was brought on by the COVID-19 pandemic, two actions were taken specifically on federal student loans:

  1. Forbearance on student loan payments
  2. No interest accrues on federal student loans

Your payments are required to be reported as being current and that you are making payments even though these payments have been suspended. That means your credit score and credit report aren’t being negatively impacted.

This is a great relief particularly for borrowers who have lost their jobs and don’t have the income to cover basic needs like food and housing. Many people still have questions about how it works. Let’s try to answer some of those questions.

What Type of Student Loan Programs are Included?

The CARES act only covers almost all federal student loans. That means that if you have a loan through a private lender such as Wells Fargo or Discover, it’s not included. You should continue to pay your private student loans unless your lender gives you other information.

Federal student loans include the following:

  • Direct Subsidized Loans
  • Direct Unsubsidized Loans
  • Parent PLUS Loans
  • Graduate PLUS Loans
  • Direct Consolidation Loans

Loans that are in default are also included with this forbearance and 0 percent interest. There are a few loans through the FFEL Program Loan and Perkins Loans that aren’t covered because they aren’t owned by the federal government. Perkins Loans that are owned by the school are an example of such a loan.

How Long are my Payments Deferred?

The student loan forbearance period is for six months which started on March 13 and ends September 30th. The forbearance is automatic, so there is nothing that you need to do. Even if you are on an automatic payment plan, you don’t need to take any action. It may take some time for your student loan servicer’s system to update their information so you might not see the due date change immediately.

The 0 % interest period on your student loans runs through the same period as the forbearance. Interest that accumulated from the time the period started to when the law was passed on March 27 will be retroactively adjusted.

What Happens if I Continue to Pay or already made a Payment?

If you continue to make student loan payments during this forbearance period you are able to do so. Since the interest rate is 0 on these loans, your payments will be applied to your principal amount. That enables you to pay off your loan faster and also save on interest charges over the course of your loan. It’s a smart financial decision to continue making payments on your student loans during this time if you’re able to.

Now if you already made a payment after March 13, you can still get a refund. This applies to any payment that’s made during this student loan forbearance period too. You can request this refund from your servicer.

To learn more about the COVID-19 outbreak and how it affect federal student loans, contact us at Student Loan Medix for a free, no obligation consultation about your student loans.  We can help you get your defaulted or delinquent student loans back on track with a consolidation or rehabilitation.  Contact tracey@studentloanmedix.com or  call us at (480) 676-2889.  Student Loan Medix is an assumed name for Gary D. Nitzkin, P.C., a Michigan based law firm.

Attorney Gary Nitzkin
Student Loan Lawyer
Admitted in Michigan only