This morning I talked to three friends and one family member who all had concerns about COVID-19 student loan relief. They said their student loan servicers were providing them with conflicting student loan relief information. Most of their concerns were easy to dispel when looking directly at the CARES Act bill.
COVID-19 Student Loan Relief Concerns
Some student loan servicers, like mine, are issuing notices that directly contradict the new stimulus plan bill signed on March 27th. I will assume the loan servicers are still catching up on the bill.
Below are some of the questions my friends have asked and what the CARES Act states.
Why if my interest rate the same?
The interest rate on federal student loans should have been lowered to 0%. You should see this change in your account. I saw mine on March 30th, so it did take some time. Check-in regularly to make sure this is applied and backdated to March 13th.
The bill states, ” (b) No Accrual Of Interest.—Notwithstanding any other provision of the Higher Education Act of 1965 (20 U.S.C. 1001 et seq.), interest shall not accrue on a loan described under subsection (a) for which payment was suspended for the period of the suspension.”
If you have private student loans, Perkins loans, or FFEL loans not owned by the US Department of Education, the student loan relief issued through CARES Act does not apply. For more on this, read the Stimulus Plan Federal Student Loan Relief article.
My interest rate is at 0%, but they are still taking out an April payment. What does this mean?
The loan servicer may take the next payment out for April. FedLoan has a notice that you must select forbearance in order to get the payments suspended. Again, suspended payments should happen automatically, so I am assuming they are catching up. UPDATE: As of 4/4 FedLoan put all loans on administrative forbearance.
A friend sent me the e-mail from GreatLakes that has assured borrowers the April payments taken out will be credited back to the account. Let’s hope FedLoan follows suit.
It is important to keep making payments until they catch up. You want to keep your account in good standing. Suspended payments will happen- but you may end up making your normal payment in April.
The bill states, “(a) In General.—The Secretary shall suspend all payments due for loans made under part D of title IV of the Higher Education Act of 1965 (20 U.S.C. 1087a et seq.) for 3 months.”
I’m on PSLF. My loan servicer said the suspended payments won’t count.
FedLoan has published a notice that states suspended payments won’t count towards PSLF.
I cannot (and would never) guarantee that your servicer will allow the payments to count. All I can say is that FedLoan has been wrong before and this is not the case according to the bill.
The bill states, “(c) Consideration Of Payments.—The Secretary shall deem each month for which a loan payment was suspended under this section as if the borrower of the loan had made a payment for the purpose of any loan forgiveness program authorized under part D of title IV of the Higher Education Act of 1965 (20 U.S.C. 1087a et seq.) for which the borrower would have otherwise qualified.”
This specifically states that borrowers suspended payments will count towards PSLF.
COVID-19 Student Loan Relief will Take Time to Implement
At this point, all I can say is that according to the bill, several federal loan servicers are sending out misinformation. I am not sure if borrowers will need to argue with them just yet, or if the loan servicers will quickly catch up with the CARES Act. For now, I am keeping a close eye on all communications, for both myself and other borrowers. I think, that just like all government operations, the student loan relief will take time to implement properly.
If you have any loan servicers who are sending out conflicting information, drop a comment below.
Note: I am not a financial advisor or a student loan lawyer. I am in the trenches with you all paying off debt. Jay S. Fleischman is a student loan lawyer who offers consultations if you are in need of one.