COVID-19 Guidance: Update on Student Loans

At Working Credit, we want to make sure you have the information you need to protect your credit score during COVID-19. Today, we’re providing an update on federal student loan repayment options, based on the CARES Act passed on March 27, 2020.

 

If your federal student loans are NOT in default, your payments have been suspended through September 30, 2020. There is nothing you need to do.

o This provision went into effect on March 13, 2020, so if you made a payment after that date, you can call your student loan servicer and ask to have the full amount of that payment refunded.
o If you’re enrolled in the Public Student Loan Forgiveness (PSLF) program, there’s good news. Every month during the suspension period counts toward the 120 months you have to complete to have the remaining amount of your student loan debt forgiven.

If your federal student loans are in default BUT you are currently in a rehabilitation program, your payments have also been automatically suspended through September 30, 2020. Here, too, there’s good news. Every month during the suspension period counts toward the 9 payments you have to make (over a 10-month period) to get your federal student loans out of default status. There is nothing that you need to do.

o This provision went into effect on March 13, 2020, so if you made a payment after that date, you can call your student loan servicer and ask to have the full amount of that payment refunded.

If your federal student loans are in default, all collection efforts have been suspended through September 30, 2020. This means you should not receive calls or letters from collection agencies about your federal student loans. It also means the federal government will not garnish your wages through September 30, 2020, nor will they withhold a tax refund or social security payments.

o This provision went into effect on March 13, 2020, so if your tax refund - or any of your social security payments - were withheld, after that date, you should expect a refund. If you don’t receive an expected refund, call the Education Department’s Default Resolution Group at 1-800-621-3115 and explain your situation.
o If your wages were garnished after March 13, 2020 - beacuse of federal student loan debt - contact your employer (start with the  Human Resources department) and ask for a wage garnishment refund. 

No interest will accrue during the suspension period. The federal government set interest rates on all defaulted AND non-defaulted federal student loans to 0% on March 13, 2020, and this will last through September 30, 2020. So don’t worry about your loans accruing interest during the suspension period. They will not!

Check out this link for more information: https://studentaid.gov/announcements-events/coronavirus

Frequently Asked Questions

If I’m NOT struggling to make my student loan payments, should I stop paying through September 30, 2020?

● It depends. You might want to take advantage of this interest-free suspension period to build up emergency savings.
● But, if you have enough in emergency savings, you might want to continue (and even increase) your payments as the interest-free period means your whole payment will go toward principal, and your loans will be paid off faster.

What if I have private student loans?

● Private student loans are not covered under the CARES Act. If you are struggling to make payments on your private student loans during the COVID-19 crisis, contact your lender. Many private student loan companies are willing to pause payments during this time, but you can’t be sure until you call. If your lender agrees to pause payments, you should assume your loan(s) will still be accruing interest.

For more information about Working Credit, contact us at info@workingcredit.org, or call our office at (312) 339-5357

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