How the CARES Act May Impact Your Student Loan Repayment Strategy

Due to the COVID-19 pandemic, more than 30.3 million Americans have filed for unemployment as of March 15, 2020.¹ To help those struggling during this time, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed to provide some relief to individuals, families, and businesses. As one of the major provisions, federal student loan borrowers are not required to make a payment now through September 2020; additionally, federal student loans will not accrue interest during this time.²

With the passing of this legislation, there’s a lot to sort through. What does this mean for your federally held student loans? How do you know if your loans qualify? Should you take advantage of the CARES Act and not make payments? Let’s break it down and dive a little deeper.

Two ways the CARES Act impacts your federal student loans

As mentioned above, from when the act was passed on March 27, 2020 through September 30, 2020 no interest will accrue on your federal student loans; repayment will resume October 1, 2020. During this time, you are not required to make payments on:³

• Federally held student loans
• Defaulted and non-defaulted Direct Loans
• Defaulted and non-defaulted Federal Family Education Loan (FFEL) Program Loans
• Defaulted and non-defaulted Federal Perkins Loans
• Defaulted Health Education Assistance Loans (HEAL)

Some FFEL Program Loans and HEAL loans may be owned by commercial lenders, and some Perkins Loans may be owned by your university – if so, those loans do not qualify.³

Eligible student loans are categorized as National Emergency Forbearance. This means, from when the act was passed on March 27, 2020 through September 2020, you will not be required to make payments on your student loans.

If you are unsure whether or not your student loan is eligible for forbearance, contact your loan provider for assistance.

What is National Emergency Forbearance?

Under the CARES Act, The National Emergency Forbearance Program was automatically enacted to provide a temporary pause on federal student loan payments; there is nothing you need to do to take advantage of this program. You should, however, review your online accounts and any communications from your loan provider as you will find important details and information about this program.

Making payments during National Emergency Forbearance

If you can make some or all your student loan payments during this time, you are still able and encouraged to do so. Your payments will be directly applied to the principal, instead of the interest, allowing you to pay your student loan balances down quicker.

• Note: If you decide to take advantage of this forbearance option, your credit score will not be impacted negatively, since these will not be considered missed payments.

It’s important to take the time to understand the CARES Act so you can decide how to manage your budget, including your student loan payments. Whether you choose to continue to make payments and pay on the principal or use the money for other reasons, it’s best to review your financial situation, bills, and accounts before you decide. Keep in mind, this is a temporary forbearance and payments will resume, and interest will begin to accrue again in October, unless you have other arrangements worked out with your loan provider. At that time, if you find you’re still in need of financial assistance, talk with your provider for additional relief options.