This article was updated on August 10, 2020.
A lot has been written about student loan relief. Much of it has been unevenly covered, with emphasis and clarity on some parts but not others. While there is a lot of information and misinformation out there, this is meant to be a definitive account of what’s true and accurate.
Student loan relief
On Friday, March 13, 2020, Trump announced a temporary student loan interest waiver for federal student loans held by the federal government. Days later, the Department of Education informed federal student loan servicers that the government would waive student loan interest “indefinitely.” The mechanic for waiving student loan interest would not be lowering monthly payments, but rather, making borrowers' monthly payments go 100% towards principal. The impact on borrowers would therefore not be monthly cash relief but rather a reduction in time for which borrowers pays their current student loan balance. "Indefinitely" was later defined as "May 12, 2020" - that is when this federal relief was scheduled to expire.
Then, one March 27, 2020, the $2T+ stimulus package became law, which transformed the earlier announced 2-month interest waiver into a full-fledged payment freeze – for 6-months – in which no payments would be due, and interest would not accrue. This relief was automatically available to student loan borrowers with a federal loan held by the federal government, and was intended to last through September 30, 2020. The relief has now been extended until December 31, 2020.
In short, you don't have to pay your student loan payment during this time. And your credit will be protected during this period, as will your eligibility for Public Service Loan Forgiveness (PSLF), Income-Based Repayment (IBR), and other special government repayment programs. Finally, you do not need to do anything to make this happen - it will happen automatically - but it would be a good idea for borrowers to call their federal loan servicer to make sure because...
This relief is only for student loan borrowers whose loans are held by the federal government. Some federal student loans are not held by the federal government, but rather held by private investors - such loans are not covered under federal student loan relief - these borrowers must continue making payments every month. This group represents about 20% of people who hold federal student loans, and is generally tied to federal loans originated before July 1, 2010. To know for sure, you would need to call your federal student loan servicer and ask.
However, you can also consolidate your old loan into a new loan so that it’s held by the federal government and you can qualify for the relief through December 31, 2020.
If you fall into the group that gets relief through December 31, know that autopay is supposed to be automatically be paused. If, however, you wanted to continue making payments during this period (to pay down the loan faster since all payments go towards principal during this time), then you would want to contact your servicer to ensure autopay continues.
In short, what this all means is:
- If you have a federal student loan that is held by the federal government, then you qualify for student loan relief (through December 31, 2020), and you don't have to do anything to activate that relief. If you are unsure if you qualify for the program, it is advisable to you call your federal student loan servicer to confirm that your federal loan is in fact held by the federal government (~20% of federal loans are not held by the federal government).
- If you have a federal student loan that is not held by the federal government, you must continue to make your payments, as usual. You can contact your servicer to request forbearance, but keep in mind interest will continue to accrue on your loans.
What's going on?
The government has announced a number of things that are student-loan related in the past few weeks. Much has been written, sometimes confusingly so. Here's how it breaks down:
- If you have a federal student loan that is held by the federal government, then you can take advantage of the student loan payment and interest freeze. This is supposed to happen automatically on all loans of this type.
About 80% of federal student loans are held by the federal government (Department of Education). To find out if your federal student loan is held by the federal government (or not), you can contact your federal student loan servicer - a list of which is here.
How long will it last?
- Until Dec 31, 2020, if you have federal student loans held by the federal government
It is recommended that you contact your federal student loan servicer to confirm whether the federal government holds your loan or not - that will let you know whether you qualify.
What do I need to do, in order to take advantage of the government's federal relief program?
- If your federal loan is held by the federal government, then your entire student loan payment will automatically be paused (through December 31, 2020). You do not have to do anything to activate this - this should automatically apply to your loan, such that 100% of your monthly student loan payment will be reduced to zero. Your credit will not be impacted during this time, and your eligibility for special government repayment programs like Public Service Loan Forgiveness (PSLF) and Income-Based Repayment (IBR) will continue. In addition, wage garnishment and other forms of debt collection are suspended on defaulted loans.
- If your federal loan is not held by the federal government, you can contact your loan servicer to see what Covid-19 programs they offer to borrowers.
If you want to confirm your eligibility for federal relief, you can contact your student loan servicer, to see if your federal student loan is held by the federal government or not. Here is a list of federal student loan servicers, including contact information.
Does this apply to me?
- If you have federal student loans held by the federal government, then yes, you can benefit from federal relief
- If you have federal student loans not held by the federal government, then no. But you could try to consolidate your current federal loan into a new federal loan (which would be held by the federal government), and thereby qualify for federal relief.
- If you have private student loans, then no. That said, most private student lenders do have “forbearance” which means you can pause payments in times of economic hardship.
Should I take advantage of federal relief, or should I just refinance rates are at historic lows?
The truth is: it depends on your personal situation and on how long federal relief lasts. To help you figure it out for yourself, we built this nifty little tool which helps you evaluate what to do.
For most people, the right answer is to take advantage of federal relief. In fact, that's what we're recommending to people with federal student loans right now.
What happens when federal relief is lifted?
If you just wanted to "wait and see" for now, but you didn't want to miss out on refinancing into a lower interest rate once federal relief is lifted, just register here, and we’ll let you know when federal relief is lifted.
What’s the best way to get updates as things change?
We created a Student Loan Relief Tracker here - Sign up with an email address, and you will receive updates about federal relief as they happen.
Where else can I go to learn more?
We know of many people and organizations in the space who are good and trusted sources of information on student loans.
- Student Borrower Protection Center. This organization is led by Seth Frotman, former Student Loan Ombudsman at the CFPB.
- Saving For College. This organization is associated with Mark Kantrowitz, Publisher and Student Loan Expert.
Government sources include:
These are not normal times. Hang in there! We’ll update this page as things change.