Automatic Payment Suspension and Other Relief During COVID-19
Many of us have student loans for ourselves or our children and for many of us, they are the largest debt we will incur. Yet, so many of us are unaware of how to manage this type of debt effectively so it does not negatively impact our personal finances. This article will discuss ways to effective manage your student loans during this pandemic and beyond.
Federal Student Loan Holders
Under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, federal student loan payments are automatically suspended, without interest or penalties, until September 30, 2021—an end date which has been extended three times, including twice by the U.S. Department of Education. Below is a quick overview.
Qualifying federal student loans, whichinclude non-defaulted and defaulted loans must be owned by the U.S. Department of Education (U.S. ED). The suspension start date was March 13, 2020 and runs through September 30, 2021 with an interest rate during suspension dates of 0%.
Here are the types of loans that currently qualify for the payment suspension:
- Direct Loans
- Federal Family Education Loans (FFEL)
- Federal Perkins Loans
Loans that do not qualify for this relief include:
- older FFEL loans not owned by U.S. ED;
- Perkins Loans owned by schools; and
- Private student loans.
We recommend you log in to the National Student Loan Data System at NSLDS.ed.gov to see which of your federal loans qualify.
See the section “Other Student Loan Holders” if you have loans that are not owned and administered by the federal government.
During the payment suspension period, you are in automatic administrative forbearance. Autopay (auto-debit payments) is canceled during administrative forbearance. Also, The U.S. Department of Education will report “on-time payments” to credit bureaus whether or not you keep making loan payments.
If you choose to keep making loan payments, you need to contact your loan servicer to re-enroll in autopay or manually schedule payments online. Important to note, make sure your loan servicer has your up-to-date address, email address, and phone number on file so you receive timely information about your loan.
If your federal student loan are enrolled in autopay, please note that autopay is suspended during administrative forbearance. You can contact your loan servicer to opt out of administrative forbearance and re-enroll. Also, you can get a refund for any auto payment between March 13, 2020 and September 30, 2021. Contact your loan servicer for help with refunds.
If your federal student loans are enrolled in Public Service Loan Forgiveness (PSLF) or Income-Driven Repayment (IDR) Programs any payments made during the suspended period (March 13, 2020 – September 30, 2021) count toward your total number of “qualifying payments” in PSLF and IDR.
As part of administrative forbearance, you will not have to recertify your income before the end of the COVID emergency relief period, regardless of whether your recertification would have happened prior to the end of the relief period. Note:
- Your loan servicer will notify you about your new recertification date before it is time to recertify.
- You will also receive a reminder 60-90 days before the new recertification date.
- Contact your loan servicer if you do not receive information about your new recertification date.
If you are considering IDR/PSLF you should submit your recertification or enrollment now if any of these situations apply to you:
- Your income decreased.
- Your family size increased.
- You want to lower your loan payment.
New IDR/PSLF enrollees will also get credit for suspended payments during the administrative forbearance.
If you are a Federal Student Loan Holders Who are Delinquent or in Default please note that no collection actions will happen before September 30, 2021. Collection actions may include administrative wage garnishment (garnishment without a court hearing), federal tax refund offsets, and federal benefit offset (for example, seizure of Social Security benefits). If your refund or benefits were offset or your wages garnished after March 13, 2020, you will receive a refund. Also, suspended payments (March 13,2020-September 30, 2021) count toward loan rehabilitation.
For more information on federal loans, contact U.S. ED’s Default Resolution Group at:
(TTY for the deaf or hearing-impaired)
If you are a Federal Student Loan Holder who are able to continue payments, your payments will pay off accrued interest before March 13, 2020 and go toward the principal loan balance. Also, your monthly payment will not go down; however, you will repay your loans more quickly and pay less over time. Lastly, if you are in forbearance, there is no penalty if you pay less than the monthly payment amount.
For FFEL loans owned by the New York State Higher Education Services Corporation (HESC), contact NYS HESC to understand your options:
- If you’re having trouble repaying your NYS HESC FFEL loan and need help, contact NYS HESC via webform at hesc.ny.gov OR email email@example.com.
- If you’re in default on your NYS HESC FFEL loan and need help, contact NYS HESC Office of Default Collections at 1-866-991-HESC (4372).
For FFEL and Perkins loans not owned by U.S. ED or NYS HESC, contact your student loan servicer to understand your options. You may be able to consolidate your loan(s) into a Direct Consolidation Loan that qualifies for relief; however, consolidation will affect your long-term interest rate and total repayment amount. Deferment and forbearance may also be an option.
Some private student loan servicers are offering relief to borrowers impacted by the COVID-19 pandemic. Contact your private loan servicer to ask about available alternative payment options.
All Student Loan Holders
No matter which type of lender you have, here are important questions to ask:
- Does my loan qualify for an income-driven repayment (IDR) plan?
- Are deferment or forbearance available to me? If Yes:
- What is the duration for both options?
- What are the implications for both options?
- Are there fees associated with the relief the loan servicer is offering? If Yes:
- Can the fees be waived?
- Will any relief I receive result in negative credit reporting?
As always, if you know your student loans have been an issue, and you would like to discuss how to best handle your loans while they may be in forbearance, please contact your financial counselor, Michael Hall. You may schedule your confidential appointment by calling 311 or by email: firstname.lastname@example.org.