Consumers hit hard by the effects of the COVID-19 pandemic can find some help, thanks to new legislation passed by Congress. Those who can benefit include some student loan borrowers.
The federal CARES (Coronavirus Aid, Relief, and Economic Security) Act suspends payments on federal student loans until Sept. 30.
The Iowa Attorney General’s Office and Iowa College Aid are spreading the word about benefits for borrowers.
“The economic pain caused by this pandemic is devastating for many,” Attorney General Tom Miller said. “I want to ensure borrowers and employers are aware of these benefits.”
Miller also urges private lenders and creditors not part of the CARES Act to provide a reprieve for distressed borrowers.
“We’re all in this together,” Miller said. “Let’s reach out, be compassionate and treat each other right.”
If you are paying off student loans, here’s what you need to know:
Not all loans qualify. The suspension mandated in the CARES Act is only for loans held by the U.S. Department of Education. It does not cover FFELP (Federal Family Education Loan Program) loans or Perkins loans held by private lenders, nor does it cover private loans. However, some private lenders might provide these benefits on a voluntary basis. If you’re not sure whether you qualify, contact your loan servicer. If you don’t know who your loan servicer is, you can look it up at Federal Student Aid, studentaid.gov/fsa-id/sign-in/landing.
If your loan does qualify, you don’t need to do anything. Your payments will automatically stop from March 13 through Sept. 30.
Interest is suspended, too. No interest will accrue on your loan until Sept. 30, so your outstanding loan balance won’t grow while your payments are suspended.
So is collection on defaulted loans. If you’re in default, your wages will not be garnished until Sept. 30.
You can still pay if you want to. If you choose to continue paying off your loans during the suspension, your monthly payments will be the same as before the suspension.
You won’t lose eligibility for loan forgiveness. If you’re in a public service loan forgiveness program or an income-driven plan that requires a certain number of consecutive payments, this period of suspension will not count as an interruption.
You will still be responsible for your loan. After Sept. 30, you will be responsible for paying on your loan once again. The amount will not be reduced.
If you’re an employer, you can contribute up to $5,250 toward each worker’s student debt through Dec. 31 on a tax-free basis.
Keep in mind that guidance on student loan suspension is subject to change. You can find recent news and current updates at Federal Student Aid, studentaid.gov/announcements-events/coronavirus.