The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act includes several important provisions regarding student loan payments and student loan relief. The student loan relief provisions of the CARES Act will apply to anyone with eligible federal student loans. Below is a summary of these provisions.
- Interest Rates Set to 0%: From March 13, 2020 to September 30, 2020 interest rates on eligible federal student loans will be set to 0%. This means that no interest will accrue during this 6-month period and all payments made on your student loans will be applied to your principal balance.
- Suspended Payments: From March 13, 2020 to September 30, 2020 all payments on eligible federal student loans are automatically suspended and there is no requirement for borrowers to contact their loan servicer. Each suspended payment during this 6-month period will count as a qualifying payment for borrowers repaying under a Public Service Loan Forgiveness plan. However, for the suspended payment to count as a qualifying payment the borrower must continue to meet the programs other requirements. For example, the borrower must continue working full-time at an eligible employer during the 6-month period. In addition, borrowers on an income-driven repayment plan will have the suspended payments count towards their repayment plan.
- Suspension of Involuntary Collections: If you were in default on your student loans, the CARES Act will automatically suspend all involuntary collections on eligible federal student loans. This means that there will be no federal benefit offsets, tax offsets, of wage garnishments for student loan repayment from March 13, 2020 to September 30, 2020.
- Employer Contributions: Under the CARES Act, employers can make tax-free payments up to $5,250 towards an employee’s student loans. This tax-free treatment of employer contributions towards an employee’s student loans will apply until the end of the year.
It is important to note that student loan relief under the CARES Act applies only to eligible federal student loans. If you have private student loans or are unsure if your student loans are eligible for relief under the CARES Act, contact your loan servicer.
Can AWD LAW help me?
AWD LAW is here to answer your questions. This summary is intended to serve as general information for interested persons, but it is not legal advice for any specific situation. AWD LAW attorneys are available to answer fact-specific questions for our clients. Our number is (928) 774-1478.