Note: This report on the Covid pandemic and parent student loans was originally published in May 2020. The information has been updated, but be sure to check with your loan servicer or lender to get the absolutely latest information.
With schools and businesses closed across the country, many people are facing unprecedented financial challenges. As a parent with student loans, you might be wondering about your options for coronavirus crisis relief. Fortunately, some recent measures could ease the burden of your debt during this difficult time — consider the following:
- Interest and payments have been waived for 6 months
- Collections efforts will temporarily cease
- You can keep making progress toward loan forgiveness
- Some private lenders are offering relief
- You can keep paying if you prefer
- Employers have a new incentive to help with student loan payoff
With the passing of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. the government issued a six-month suspension of interest and payments on federal student loans, whether they are in default or good standing. Eligible loans include:
- Parent PLUS loans
- Grad PLUS loans
- Direct subsidized and unsubsidized loans
- Federally-held FFEL loans
- Federally-held Perkins loans
If you have FFEL or Perkins loans, log into your Federal Student Aid account to find out if they’re federally held. If they’re not, you might be able to make them eligible by applying for a Direct Consolidation loan. Note that private parent loans do not qualify and cannot be made eligible.
Loan servicers are automatically waiving interest and payments on federal student loans, so you shouldn’t have to do anything on your end. But it’s a good idea to log into your online accounts to ensure everything looks the way it should.
If you’ve had parent loans go into default, you might be familiar with the relentless efforts of collections agencies. Not only do they make frequent calls demanding payments, but they add high fees to whatever you already owe.
What’s more, the government can garnish your wages, tax refund or even Social Security payments to collect on federal debt. Fortunately, you won’t have to worry about any collections efforts or garnishments for at least the next six months, as the Department of Education has suspended these.
And if your wages or tax refund was garnished after March 13, 2020, due to federal student loans, the government should issue you a refund. But since fees, collections attempts and garnishments could continue once this period ends on May 1, 2022, it’s a good idea to get your loans out of default as soon as possible.
If you’re a parent working toward loan forgiveness, you don’t have to worry about this six-month forbearance messing with your progress. Unlike typical periods of forbearance, this one won’t count against your qualifying payments toward a loan forgiveness program, such as Public Service Loan Forgiveness or the debt cancellation you receive after 25 years on Income-Contingent Repayment.
So if you need a few months’ rest from your student loan payments, you don’t have to worry about pushing back your loan forgiveness date.
While private parent loans are not eligible for the aid measures in the CARES Act detailed above, you might still get some relief from your private lender.
Some private loan companies are letting parents pause payments for up to three months through emergency forbearance or deferment. Some are also offering a modified payment plan if you need additional help after this period ends.
Just note that, unlike on your Parent PLUS or other federal loans, interest may very well continue to accrue on your private student loans during any period of forbearance. Read our list of private lenders offering relief during the coronavirus pandemic to learn more. If your loan servicer isn’t on the list, email or call directly to find out about your options.
While you likely have options to pause payments on your parent student loans for the next few months, you don’t necessarily have to. If you can afford to keep paying, you could use this period of 0% interest on your federal parent loans to take a big bite out of the principal on your debt.
Just remember that your federal loan servicer might automatically put your loans into forbearance, so you might have to manually input student loan payments to keep chipping away at your debt.
And before making extra payments on your student loans, your priority should probably be covering living expenses, building up your emergency fund and paying off high-interest debt.
Depending on your place of employment, you could get extra assistance paying off your student loans. The move provides employers with a new incentive to help their staff with student debt, at least through 2025.
Under the newly-enacted measures, companies can provide up to $5,250 in student loan repayment assistance, tax-free. While some companies already provide student loan-matching benefits, others might jump on the bandwagon with this additional tax incentive.
Since policies are changing rapidly, your options for student loan relief as a parent could shift in the days and weeks to come. To stay up to date, check out Student Loan Hero’s Coronavirus Information Center.