What to know about Student Loans and the Pandemic

There’s been plenty of bad news lately, so here’s a little bit of good news. Whether you’re a current student loan recipient or hoping to obtain loans for your education in the future, take heart: the new Coronavirus Aid, Relief, and Economic Security (CARES) Act includes measures to help student loan recipients. If you get bored while sheltering in place, you can check out the entire law—it's 247 pages long! But if you’d rather spend your time more productively, here’s a brief overview of what you should know.

The CARES act, passed by Congress late last month to the tune of more than $2 trillion, offers relief to student loan borrowers during the national emergency caused by the COVID-19 pandemic. From now until September 30, federal student loan borrowers are automatically being placed in an administrative forbearance.

For certain types of student loans, this means you can temporarily stop making your monthly loan payment. During the same time period that payments may be skipped, any borrower continuing to make loan payments will have no interest charged for qualifying loans.

Federal loans

These financial breaks apply to loans “owned” by the federal government under the Direct Loan, Federal Family Education Loan (FFEL), and Federal Perkins Loan programs. Direct Loans include Direct Subsidized Loans (for undergraduate students who demonstrate financial need)  and Direct Unsubsidized Loans (for undergraduate, graduate, and professional students without financial need being a factor). They also include Direct PLUS Loans (for graduate or professional students and parents of dependent undergrads) and Direct Consolidation Loans (where eligible federal student loans are combined into a single loan with a single loan servicer).

Private loans

Keep in mind that the universe of student loans is big. Some loans are made through third parties instead of coming directly from the government. These providers are not covered by the new law and are not required to allow delay of monthly payments. Some, however, may voluntarily offer forbearance or reduced interest. If you’re not sure where your student loans stand, check with your loan servicer. Consult your billing statement or other documents to find contact info for any questions, or peruse your loan provider’s website. Knowing your loan provider is important to keeping on top of your loans.

These changes also include other considerations. For example, while most attention is being focused on the fact that monthly payments are being automatically stopped, you can continue making payments if you prefer. This may sound questionable on the surface, but if you’re able to afford keeping up with payments, you’ll be six months closer to having your loan paid off.

Fortunately, the positive news isn’t restricted to just current holders of student loans. If you’re a new or prospective college student at the beginning of the student loan process, there’s also room for optimism.

The federal government is still in business, and that includes processing student financial aid, so filling out the Free Application for Federal Student Aid (FAFSA) application is still something you should do. This is the standard application to apply for grants, work-study awards, and other aid in addition to loans. While some schools have preferred deadlines for completing the FAFSA that have already passed, others haven’t. The government’s deadline to apply for support for the 2020–2021 academic year is June 30.

At the website where you apply for aid, the US Department of Education also provides a wealth of related info. The section “Learn About Grants, Work-Study, Loans, and Scholarships” is especially helpful if you want to learn more about the various loan options. For those already holding loans, the details under “Manage Loans” include information on options for loan forgiveness, circumstances where loans can be discharged, and tips on avoiding default.

Keep in mind that despite pandemic-related restrictions, colleges and universities also remain helpful sources of information and assistance. Efforts to continue operations, even if it’s not exactly “business as usual,” are ongoing. While things are unsettled now with most higher education employees working remotely, don’t forget that schools need students—they need you. Financial aid, advising, and other staff will work hard to make sure you have the funds needed to attend (or continue attending).

Don’t hesitate to contact any college or university for guidance about issues ranging from the financial aid application process to specific questions about loans. Initially, the best source of information is the school’s website. There you’ll find the latest info about changes made in response to the pandemic, email and phone contacts for financial aid staff, and more.

While college personnel can be among the most helpful people you encounter, the same might not be true of strangers who contact you about student loans. In any such communications, watch out for scams. Be wary of phone calls, emails, texts, or letters that make claims about your loans or ask for personal information. For example, if someone calls to confirm that your loan payments will be paused and quickly asks for your account username and password, red flags should go up (the feds never do this). The same goes for offers to provide debt relief if you pay up-front fees, or for claims that you must act immediately to gain some type of benefit. If you’re contacted in this way, do not respond. Pose any questions directly to your loan provider through the contact information found on their website.

While monitoring your own situation, keep up to date on changes as they come. In the weeks or months ahead, Congress is expected to provide even more money to help the economy, including support for higher education. That could possibly include more help with your student loans and other financial aid. Watch the news for such developments, and check with your college contacts when you have questions.