As the economic fallout from the coronavirus pandemic continues, millions of student loan borrowers are struggling with their debt. Congress has enacted some important relief programs for student loan borrowers, and new proposals could expand upon that relief. Some states have also tried to help student loan borrowers through their own unique initiatives.
But this confusing patchwork of options, on top of an already complicated student loan system, has left many borrowers in the dark. Here’s what you need to know:
- CARES Act relief – find out if you qualify
- For other student loans, contact your lender or servicer
- Pull your credit report
- Stay informed
In April, Congress enacted the CARES Act, which provides critical student loan relief for millions of borrowers. The coronavirus relief act suspends all payments, stops all interest accrual and ceases collections efforts on all Department of Education-held federal student loans.
Of course, the details matter. Not all student loans are federal, and not all federal student loans are government-held. The relief was enacted automatically, so chances are if you qualify, your payments and interest have already been suspended. If you’re unsure, you can check the Department of Education’s federal loan database at studentaid.gov.
For student loan borrowers on track for loan forgiveness programs like Public Service Loan Forgiveness, the months of suspended payments should still count toward loan forgiveness, even if no payments are made.
For borrowers who are on track for eventual loan payoff, making voluntary payments during the suspended interest period (even if you don’t have to) could save you money in the long run, since every payment you make will go entirely to your loan balance.
While the CARES Act protections are important, millions of borrowers with commercially-held FFEL-program federal loans and private student loans are not covered. However, these borrowers may still have options.
Several states have formalized voluntary agreements with private student loan lenders and servicers to provide temporary relief to borrowers in response to the pandemic. This relief can include a temporary suspension of payments, temporarily modified repayment terms and a waiver of late fees. Not all states – and not all private lenders and servicers – are participating. Borrowers should contact their lenders or servicers for more information.
Borrowers should also inquire about the terms, conditions and consequences of any temporary relief. In some cases, interest may still accrue, even if no payments are due. This can lead to higher monthly payments when the forbearance ends, or a longer repayment term.
There are reports of student loan servicers improperly reporting loan statuses to credit bureaus in response to coronavirus-related forbearances, leading to credit damage. Student loan advocates recently filed a class-action lawsuit alleging widespread credit reporting errors.
Under the Fair Credit Reporting Act (FCRA), all consumers are entitled to one free credit report annually from each of the three major credit reporting agencies. Annual Credit Report is offering a free credit report each week through April 2021. [Note: This has been extended to April 2022.] Borrowers may want to pull and review their credit reports periodically, and dispute any inaccurate or erroneous information.
The landscape surrounding student loan relief in response to COVID-19 is rapidly changing. There are at least five major student loan relief proposals being considered in Congress.
The House recently passed the HEROES Act, which would dramatically expand the protections of the CARES Act, and would also provide student loan forgiveness to economically distressed borrowers. While the chances of the HEROES Act passing the Senate are low, Congress will continue to consider student loan relief proposals in the coming months. So, stay tuned.
Adam Minsky is an attorney and leading expert on student loan law. He runs a practice devoted to helping student debt borrowers, and among other work, he is a contributing author to the National Consumer Law Center’s manual, “Student Loan Law.”