How to Get Student Loan Relief During the Coronavirus and Beyond

The feds, states and even private lenders are offering relief for student loan borrowers.

Ryan Lane, Anna HelhoskiSeptember 2, 2020
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How to Get Student Loan Relief Now

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Lost wages due to the new coronavirus and the disease it causes, COVID-19, may affect your ability to manage and repay student loans. The federal government, states, private lenders and others are offering student loan relief to help you manage the economic fallout.

Here are the current options you have for student loan relief. As new programs are introduced, this page will be updated with additional information.

Federal student loan relief

The federal government is offering options for borrowers who need help with their student loans. The following measures last until Dec. 31, 2020.

  • Automatic forbearance to all federal loan borrowers.

  • Automatically waiving interest on federally held student loans.

  • Stopping all collection activities on federal student loans in default.

Here’s more information about these programs, as well as existing repayment options student loan borrowers can take advantage of for payment relief.

All loans from the federal direct loan program, including subsidized, unsubsidized and PLUS loans, qualify for the government's student loan relief options. Most borrowers have direct loans.

Perkins loans and loans from the Federal Family Education Loan program may qualify, if they're held by the government. Look at the loan holder in your studentaid.gov account. If the Department of Education is listed, you will receive these benefits.

If the federal government does not currently hold your loan, you can consolidate them at studentaid.gov to qualify for relief. But consolidation will cost you benefits tied to your existing loans, such as Perkins loan forgiveness.

Payment postponements

Borrowers with federally held student loans automatically receive a forbearance through Dec. 31, 2020. No payments will be due during this break. Additionally, no interest will accrue, which is typically not the case with forbearance.

All auto-debit payments will be automatically suspended.

This forbearance is automatic, but you can still make payments of any amount over the next six months if you want to reduce your balance. Or use the pause to prioritize other money moves, such as starting an emergency fund or paying down high-interest debt, since your student loan balance won’t increase during this break.

Due to the forbearance, your repayment term may be extended so your final payment date will be nine months later than you originally thought.

Here are other scenarios the forbearance might affect:

You're a recent graduate

If you're entering repayment for the first time, there may be some overlap with your grace period. That means if you were supposed to start making payments during the forbearance period, your first payment won't be due until January. Usually interest on unsubsidized direct loans continues to build during the grace period, but if your grace period overlaps with the administrative forbearance, interest will not accrue during those months.

You can use this time to find out who your servicer is, what your first bill will look like and how to apply for income-driven repayment if you can't meet your payment.

You already had a forbearance in place

This administrative forbearance supersedes all other deferments or forbearances. If your prior forbearance or deferment's original end date was after Dec. 31, 2020, it will be reinstated beginning Jan. 1, 2021.

You're taking time off from school

If you have federal student loans and leave school for any reason you typically have six months before you must start repaying the debt. For example, if you last attended school in the spring and plan to take the fall semester off, your payments would normally come due in the fall. But the extended forbearance delays your first payment until January.

Whenever you start back up again at college (attending at least half-time) you can defer payments until you finish school or leave again. But since you already used up your grace period, when  you graduate or leave again your loans would be due right away.

Interest waiver

The interest rate on federal student loans is set to 0% through Dec. 31, 2020. During this time, no new interest will accrue on federally held student loans.

If you repay loans during this period, your entire payment will go toward your principal balance, provided you have no other outstanding interest or fees on the loans. This will save you money overall, though your actual payment amount won’t change.

Collection activities

The federal government has ceased all collection activities on federal student loans through Dec. 31. These activities include wage and Social Security garnishment, tax refund seizure and collection calls and letters.

This policy is retroactive to March 13, meaning you'll receive a refund for any forced student loan payments since that date. But if your 2019 refund was seized before March 13, it is not required to be returned.

If you're currently rehabilitating defaulted loans, all nine months of the original forbearance and extension through the end of the year will count toward the nine you need to complete this process.

Stimulus checks won't be taken due to defaulted student loans.

Alternate repayment plans

Federal student loan borrowers can choose from a number of different repayment options. If you’ll be unable to afford your student loan payments in the long term, enrolling in an income-driven repayment plan is typically your best option.

These plans base your monthly bills on your current income and family size. Payments can be as little as $0.

If you already use an income-driven plan and your financial situation has changed, you can request a new payment amount. If you were supposed to recertify your plan before Dec. 31, you'll now have an additional time to do so. IDR recertification dates have been extended six months from borrowers’ original recertification date. Borrowers will be notified when it is time to recertify.

You should still use the time during the government’s payment suspension to complete your enrollment paperwork or provide updated financial information. That way, your new payment will hopefully be in place once your forbearance ends.

Student loan forgiveness

Be extra wary of any company that reaches out with an offer to forgive your loans; it's likely a scam.

Existing student loan forgiveness programs such as Public Service Loan Forgiveness, or PSLF, are still available.

Government and nonprofit employees pursuing PSLF do not need to keep making payments during the automatic forbearance. Those nine months will still count toward the 120 payments needed to qualify for PSLF — provided you meet the program's other eligibility requirements. For example, if you don't work full-time for an eligible employer during those months, your waived payments won't count toward forgiveness.

If you remain steadily employed in a qualifying job, don't make your payments until January. Your money has better uses until then, even if it's just building emergency funds.

For borrowers already enrolled in an income-driven repayment plan, all suspended payments through the end of the year will count toward IDR forgiveness.

How to work with your servicer

You do not need to contact your servicer to receive the payment postponement or interest waiver. But if you wish to continue making payments during the waiver period, contact your servicer for instructions.

Private student loan relief

Private lenders typically offer opportunities to pause payments for up to 12 months or longer with forbearance or deferment policies. These policies vary from lender to lender and, unlike current federal loan forbearance, interest will continue to accrue.

But some lenders are offering additional relief options, including additional short-term emergency forbearance or deferment. Others are waiving or refunding fees for late payments.

Many lenders anticipated their relief plans would conclude at the end of September, but many are open to an extension or additional relief.

When in doubt, contact your lender to find out what options are available.

Student loan refinancing

Student loan refinancing rates are currently low due to the economic climate. If you already have private student loans, strong credit and steady income, see if you can save money — monthly or overall — by qualifying for a lower interest rate.

According to a May 2020 survey of more than 2,000 U.S. adults commissioned by NerdWallet and conducted online by The Harris Poll, half of those with private loans are currently considering refinancing since interest rates have dropped dramatically.

If you have federal student loans, think hard about whether the savings from refinancing are worth it to you. You’ll lose existing federal loan benefits, such as access to interest-free forbearance and income-driven plans — as well as any new relief programs the government offers in response to the pandemic.

Relief efforts in your state

Multiple states have partnered with specific student loan servicers to offer a 90-day forbearance for commercially held federal loans and private student loans. Unlike the payment suspension in the CARES Act, interest will accrue during this break and you must contact your servicer to request it.

If your servicer is participating, relief is available in the following states:

  • California.

  • Colorado.

  • Connecticut.

  • Illinois.

  • Massachusetts.

  • New Jersey.

  • Vermont.

  • Virginia.

  • Washington.

As part of this multi-state agreement, servicers have also agreed to temporarily waive late payment fees, stop negative credit reporting and pause debt collection lawsuits.

New York has made similar relief available to its residents through a separate agreement; the state has also temporarily stopped collections on student loans referred to its attorney general’s office.

Relief efforts at your school

If colleges offering in-person classes close due to COVID-19, schools will take similar action as they did in the spring:

  • Continuing to keep housing open for its most vulnerable population, including homeless and international students. During the spring at University of Washington in Seattle, for example, residence halls remained open for students who needed to stay on campus, but only in dorms with private bathrooms to encourage social distancing. At Purchase College, State University of New York — located in one of the hardest-hit counties in New York during the spring — classes moved online, but certain groups of students were allowed to stay. This includes those without anywhere else to go, as well as international students and students without technology needed to complete online courses.

  • Offering refunds on housing and fees to students. During the spring the University System of Georgia issued refunds at a percentage of the semester’s cost for housing, dining and certain fees, as well as study abroad. At Binghamton University, State University of New York, charges for housing, meal plan and on-campus fees were prorated once a student leaves campus. Students received a credit balance automatically applied toward the fall semester unless a student requested a refund.

  • Distributing emergency financial aid and cash grants.The Department of Education distributed $6.28 billion in funds for emergency cash grants to colleges to distribute to students who needed financial assistance last spring. The grant money could be used for technology, food, housing, health care, childcare and any course materials. Colleges determined how to distribute grant funds. Schools may have their own well of emergency financial aid resources available for students, as well.

If your college moves to online learning this fall during the semester, call the school’s financial aid office to inquire about its refund policy. If you have no other suitable housing options, contact your college’s housing office to inquire about options for staying on campus.

Tax breaks for employer loan contributions

The stimulus bill amended the tax code so you won't pay taxes on student loan contributions from your employer through January 1, 2021. Previously, this money was treated as taxable income.

This change won't offer relief from your student loans, as employer contributions are on top of what you pay. But it may incentivize more companies to offer this benefit — they now get a tax break, too — or to increase their payments.

These programs often top out around $1,200 annually. But this tax benefit covers amounts up to $5,250. That total is for all education assistance an employer provides, including tuition reimbursement programs.

The survey was conducted online within the United States by The Harris Poll on behalf of NerdWallet from May 5-7, 2020, among 289 U.S. adults ages 18 and older who have private student loans. This online survey is not based on a probability sample and therefore no estimate of theoretical sampling error can be calculated. For complete survey methodology, including weighting variables and subgroup sample sizes, please contact Chloe Wallach at [email protected]."

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