The CARES Act which passed into law on March 27, 2020 contains several provisions that apply to student loans. These were included in order to relieve some the financial stress placed on students and taxpayers during the pandemic of 2020. Most of the provisions provide relief of stress by deferment of payments, but some do provide relief by forgiveness.

Here are some of the important facts regarding how the Act impacts student loans:

  • The Education Department has been ordered to grant a six month relief period for the payment of federal student loans until September 30, 2020.
  • Federal student loan payments that are deferred are subject to 0% interest and no penalties until September 30, 2020. Interest will not accrue during the six month deferral period.
  • Private student loan borrowers do not qualify for deferment of payments. 
  • Federal student loans that were converted to private loans, also do not qualify for deferment.
  • The public student loan forgiveness program allows borrowers working in the public or nonprofit sectors to qualify to have their debt erased if they have a history of making on-time payments for the past ten years.
  • The six month deferment payment on federally backed student loans will automatically apply to loans that are in delinquency.
  • Taxpayers are not relieved of any part of their student loan obligations unless they qualify for a federal student loan forgiveness program.
  • Suspension of loan payments will not affect the taxpayer’s credit rating.
  • Involuntary collections are suspended for six months.

Questions & Answers

Q: What types of student loans are considered federal student loans?

The main types of federal student loans are:

  1. Non-faulted direct loans
  2. Loans from the United States Department of Education

Q: My loan payments are currently being automatically paid through a wage garnishment program. Am I eligible to the Cares Act benefit?

Yes. Student loan debt collections will be halted during the deferral period.

Q: Do any of my federal loans qualify for loan forgiveness?

No. the CARES Act does not include any student loan forgiveness.

Q: Can I continue to make student loan payments during the deferral period?

Yes. You can continue to make loan payments during the 0% interest period but this will not lower your monthly payments when the deferral period ends.

Q: If the taxpayer is pursuing public service loan forgiveness, will the pause in payments effect my qualification?

In order to qualify for public service loan forgiveness, the taxpayer needs to make 120 payments and the loan cannot be in forbearance. The suspension of payments does not put the student loan into forbearance. Any federal student loan payments you skip will count toward the 120 required payments.