In 2020, the CARES Act legislation impacted millions of student loan borrowers by instating administrative forbearance on all federal loan programs. This was originally extended through September 30, 2020; however, under the recent COVID-19 Emergency Relief and Federal Student Aid, student loan payments have been paused through Aug. 31, 2022. For eligible loans, this pause includes a suspension of loan payments (forbearance), 0% interest rate, and stopped collections on defaulted loans.
During forbearance, there is no obligation to make monthly payments. Additionally, the remaining loan balance will not accumulate interest during this six-month period.
While you are not required to make payments during forbearance, it may be a great opportunity to pay down your loan balance. If you have the ability to continue making payments, you can do so manually. Because all automatic monthly bank transfers cease with forbearance, you will need to log into your account and pay down your selected amount. By making payments during the forbearance time period, you will reduce the life of your loan and your total interest paid.
If you participate in the Public Service Loan Forgiveness (PSLF) program, the forbearance period applies and payments are not required. This forbearance period will still receive credit toward the loan forgiveness program assuming all other qualifying factors are met.
If you have a loan through any of the federal loan programs, your payments were automatically suspended. Common loan programs include Stafford, Perkins, or Parent PLUS loans. Loans included would be held at one of the servicing companies listed below. It’s important to note that some of these servicers also offer private loans so verify which type you have. The private loans may offer their own forbearance programs, so contact your provider to find out available options.
- Federal Loan Service Providers
- FedLoan Servicing
- Great Lakes Educational Loan Services, Inc.
- OSLA Servicing
The CARES Act provides employers the option to pay up to $5,250 of an employee’s student loan debt on a tax-free basis. This provides an opportunity for both you and your employer. You may want to consult with your company to see if this option is available to you.