Coronavirus and Student Loans: What You Need to Know





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In addition to stimulus checks and expansion of unemployment, the CARES Act also highlights some measures to help student loan borrowers during this time.

According to the CARES Act, most federal student loan borrowers will be able to pause their payments through September 30.

During these six months, no interest will accrue on those federally held loans so that if you don’t make payments during this time, your balance won’t get larger.

There is also a suspension of involuntary collections on federal student loans.

Involuntary collections include a reduction in your federal benefits or tax refund if you’re in default, as well as wage garnishment.

The CARES Act outlines that student loan payments are automatically paused, as are involuntary collections.

You don’t have to contact anyone or do anything in particular to pause your payments.

Before the CARES Act was passed, if you held federal student loans, you were advised to apply for an administrative forbearance of two months, but now the passage of the act replaces that.

This also brings to light the potential for scammers to take advantage of this situation.

If you are asked to pay a fee or fill out paperwork to pause your student loans or use the interest waiver, it’s not legitimate.

You should report any situation like this to the Federal Trade Commission.

Under the legislation, most federal student loan borrowers will benefit from the pause on both payments and collections, but not all.

If you have a Perkins Loan or a Federal Family Education Loan (FFEL), you are not eligible.

You should also be able to log into your servicer account and see if a benefit was applied to your account.

For borrowers whose federal loans were excluded, you may still be able to get help if you contact your loan servicer and apply for forbearance or income-driven repayment.

With the CARES Act guidelines, if you were working toward a loan forgiveness or rehabilitation program, each month that’s part of the pause will still count toward that.

For example, if you are working toward Public Service Loan Forgiveness, these months count when you aren’t making payments due to the CARES Act.

Of course, one of the most important things to realize is that private student loans are not covered under the CARES Act.

If you have private student loans, you should contact the loan servicer and see if they are offering options, because many are.

Since the CARES Act doesn’t apply to privately held student loans, it’s up to your servicer as to how they help you. If you lose your job, contact your loan servicer right away. The faster and more proactive you are, the better.

The following are some ways major lenders and servicers say they’re dealing with the crisis.

Earnest says with their student loans, they are offering up to three months of postponed payments. This is available through a disaster forbearance. If you use this program from Earnest, your interest still accrues during the forbearance period, but it’s not capitalized. That means the interest accrued during forbearance won’t be added to your unpaid principal.

If you refinanced a federal loan with Laurel Road, forbearance for up to 12 months over the life of a loan might be available, but interest continues to accrue. According to Laurel Road, you might also be able to apply for an extension if they are your loan servicer.

Navient says that for borrowers whose loans don’t qualify for the protections through the CARES Act, they are offering up to three months of disaster forbearance, but you have to request it. This would mean that if Navient is your loan servicer, you should contact them, and you may get a postponement of your payments for up to three months.

If your loans are serviced by Nelnet, and you have an account that starts with a D

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