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Payments and interest on most federal student loans have been suspended through Dec. 31, 2020 to help borrowers cope with the economic impacts of the coronavirus pandemic.

If you’re repaying eligible federal student loans:

  • Your monthly payments are automatically suspended for the rest of the year, and you won’t be charged interest during this period.
  • While your monthly payments are suspended, you can still earn credit toward loan forgiveness if you’re in a qualifying repayment plan.
  • If you wish to continue making your monthly payments, you may make faster progress paying down your debt, because all of your payment will go toward your loan principal.

Learn more about coronavirus relief for federal student loan borrowers:

What federal student loans are eligible for relief?

Payments and interest have been suspended from March 13 through Dec. 31, 2020, for four types of federal student loans:

  • Federal Direct Loans (including PLUS loans)
  • Federal Family Education Loan Program (FFELP) loans held by the government
  • Federal Perkins loans held by the government
  • Defaulted Health Education Assistance Loan (HEAL) loans

Student loans issued by private lenders and state student loan authorities are not covered by the relief measures. Some Perkins loans are owned by schools and do not qualify for federal relief. Neither do roughly $142.4 billion in FFELP loans that are owned by private lenders.

If you’re not sure if your loans qualify for federal relief, or you’re having difficulty making payments on private student loans, contact your student loan servicer.

Converting Perkins or FFELP loans into federal direct loans

If you have Perkins or FFELP loans that are not held by the federal government, you can convert them into a federal Direct Consolidation Loan, which would be eligible for coronavirus relief.

Just keep in mind that there can be drawbacks to federal loan consolidation, such as the potential to reset the clock on loan forgiveness. If you have outstanding interest on loans that you consolidate, that interest will be capitalized and added to your principal balance.

Getting credit toward loan forgiveness

If you’re enrolled in an income-driven repayment plan and are hoping to qualify for loan forgiveness after making 20 or 25 years of payments, you will continue to receive credit toward loan forgiveness while your payments are suspended.

While their payments are suspended, borrowers who are working full-time for a qualifying employer will also receive credit toward the 10 years of payments needed to qualify for Public Service Loan Forgiveness.

Getting credit toward loan rehabilitation

If you had previously defaulted on your federal student loans and entered into an agreement to rehabilitate your loan by making nine monthly payments, all of your suspended payments will count.

If you enter into a new rehabilitation agreement during the coronavirus relief period, you will only get credit for the suspended payments made after your agreement takes effect.

Borrower protections

Loan servicers have been instructed not to report borrowers to credit bureaus as delinquent while their payments have been suspended.

The Department of Education is also suspending “involuntary collection” on defaulted loans, and will refrain from garnishing wages, tax returns or social security checks through Dec. 31.

What if I want to keep making payments?

The suspension of monthly payments and the interest waiver on federal student loans is automatic — you don’t have to apply — and retroactive to March 13. Loan servicers have been instructed to place loans in administrative forbearance and stop collecting payments until Dec. 31.

Borrowers who want to continue making payments on their federal student loans may be able to save money by paying them down faster. That’s because once you’ve paid any interest you owed before March 13, all of your monthly payment will go toward paying down loan principal.

If you want to keep paying down your federal student loans between March 13 and Dec. 31, you need to contact you loan servicer to opt out of forbearance.

What happens when coronavirus relief expires?

Coronavirus student loan relief Congress provided through the CARES Act was scheduled to expire on Sept. 30, but was extended by an executive order from the White House. Congress could extend the break on student loan payments and interest again, beyond Dec. 31, 2020. Lawmakers may choose to provide additional relief, such as loan forgiveness.

If and when coronavirus relief measures finally expire, federal student loan borrowers who are having trouble making their monthly payments can seek relief by enrolling in an income-driven repayment plan, or applying for deferment or forbearance.

An IDR plan can be more advantageous than forbearance, because some borrowers may eventually qualify for loan forgiveness after 10, 20, or 25 years of payments. If you’re already enrolled in an income-driven repayment program but have lost income because you’ve been laid off or had your hours cut, you can ask your loan servicer to recalculate your monthly payment.

Student loan refinancing

Federal student loans provide borrower protections that can be important during times of economic uncertainty, including access to income-driven repayment plans and the right to place loans in deferment or forbearance in some situations. Borrowers refinancing federal student loans with private lenders lose access to these programs.

However, incentives remain for refinancing private student loans at rates that are low by historical standards. Incentives to refinance include:

  • Reducing monthly student loan payments by extending the loan term.
  • Reducing total repayment costs by refinancing at a lower interest rate.
  • Locking in a fixed interest rate by refinancing a variable-rate loan with a fixed-rate loan.

If the interest waiver on federally-held loans expires as scheduled on Dec. 31, many parents, professionals and postgraduate degree holders repaying high-interest federal PLUS loans will again have incentives to refinance.

About the author

Matt Carter

Matt Carter

Matt Carter is a Credible expert on student loans. Analysis pieces he’s contributed to have been featured by CNBC, CNN Money, USA Today, The New York Times, The Wall Street Journal and The Washington Post.

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