COVID-19 Financial Aid Changes for Students in Repayment

Sage Crary
Sage Crary
Director of Financial Aid and Scholarships; pursuing an M.S. in Ethics and Religion
Stack of gold coins and alarm clock with ‘loan repayment’ overlayed.

COVID-19 — otherwise known as our current global pandemic, the coronavirus — has caused unprecedented changes for all of us. As educators, you may have felt these changes already. Moving your classrooms to remote learning, working with parents who are now stepping into new roles as they frenetically realize the crucial role that teachers play in their child’s lives, are just two of the many ways you have likely been impacted. However, during this time more than any other time, so many people, communities, and even government agencies, are coming together to find ways to support one another.

To that end, the Department of Education has announced a number of different relief efforts for students who are either currently enrolled in school or who are in loan repayment to help mitigate some of the effects that we may be all feeling.

COVID-19 Financial Aid Relief Efforts

As of today, here are some of the approved relief efforts that are underway for those impacted by COVID-19:

On March 13, 2020, it was announced that that all loans owned by the US Department of Education will have interest waived for the foreseeable duration of the COVID-19 outbreak (a minimum of 60 days). If you have loans in repayment, as long as they are owned by the US Department of Education, they will be eliminating all interest that would normally accrue. This includes Direct Unsubsidized Loans, Direct Subsidized Loans in repayment (they are already interest free while you are enrolled), as well as Federal Perkins Loans and FFEL Loans.

If your loans are not currently held by the US Department of Education, you do have the option to consolidate your currently-held loans by the US Department of Education (ED) so your interest will be waived. However, it is possible that once the 0% interest waiver period ends that you could have a higher interest rate under ED than you did with your previous servicer, so it’s important to ask that question prior to consolidation. Your current servicer will be able to provide you with the terms that your loans are under (loan balance, interest rate and total amount paid) and how it would compare if you consolidated them under ED.

To find out who your servicer is and whether or not you currently qualify to have your interest waived, please click here and use your current FSA ID and password. If you do not know your FSA ID or password, or need to create one, you can do that from the same webpage under ‘manage my FSA ID’ or ‘Create an FSA ID’ tabs. You can also contact ED at 1-800-4-FED-AID (1-800-433-3243 or 1-800-730-8913 for the deaf or hearing impaired) for assistance.

If you find that your loans are currently owned by ED, there is nothing else that you need to do, and the interest will be waived automatically as of March 13, 2020.

It’s important to note, though, that if your interest is being waived, your monthly payment will not go down. During this time when the interest is waived, your loan payment will remain the same, but the entire amount that you pay will be applied to principle, which means that you are likely to pay your balance down much more quickly during this time period.

During this period of time you also have the option of suspending your payments under a specific type of forbearance called administrative forbearance, which has been enacted as a result of COVID-19. An administrative forbearance allows the borrower to temporarily stop making payments to their federal student loans without becoming delinquent. Because the interest is already being waived, interest will not accrue during this time. Your loan servicer will cancel any scheduled auto-debit payments and your payments will not resume until after the approved period ends. If you are current on your loan payments and you wish to request an administrative forbearance, you should contact your loan servicer.

If you are already 31 days or more behind on your current loan payments as of March 13, 2020, your servicer will automatically place you in an administrative forbearance to give you a safety net during the COVID-19 national emergency.

If you are pursuing Public Service Loan Forgiveness (PSLF) or Income-Driven Forbearance (IDR Forgiveness), you may not want to go into an administrative forbearance unless absolutely required for your current financial status. The time that you are in the administrative forbearance does not count towards your required number of minimum payments that both forgiveness programs have, so the time you are under administrative forbearance would extend the amount of time before your loan balances are forgiven. However, if your income has changed as a result of COVID-19, you may qualify for a lower monthly payment under an IDR plan, and your payments could be adjusted to as low as $5, and this would count towards the forgiveness period. If you are on an IDR Plan and your income has changed, you can update your information and get a new payment amount anytime online. To do so, visit here and click on ‘Apply Now’ and then start an application by clicking the button next to ‘Recalculate my monthly payment.’

If you can afford to make your monthly loan payments during this time, I strongly encourage you to do so, as the full amount of your payment will go towards your principle, thus reducing the amount of interest accrued and shortening your payment terms drastically. However, if this is not possible for you, know that you are not alone and that there are many new resources available to support you during this time.

Update as of 03/31/2020 – New Changes

As of the signing of the CARES Act (Coronavirus Aid, Relief and Economic Security Act) on March 27, 2020, there are now new benefits for students currently in repayment on their Federal Student Loans. The CARES Act seeks to provide many financial incentives to help stabilize the economy and provide relief to taxpayers during this unprecedented time. A summary of some of the new changes are below:

Federal Student Loan Payments will be automatically stopped and the interest rates set to 0% on all eligible loans from March 13, 2020 through September 30, 2020. If your loans qualify, your servicer is required to contact you prior to April 14th to inform you that your loan payments are automatically being deferred and will not require a payment until on or after October 1, 2020.

If your loans are automatically deferred and payments postponed, the servicer is also required to reach out to you in August to remind you when your payments will resume. Loans that qualify include all Direct Loans (Subsidized, Unsubsidized, PLUS Loans) and FFEL and Perkins loans owned by the Department of Education regardless of their current standing (default, delinquency or good standing).

FFEL Loans and Perkins Loans that are still owned by private commercial lenders or your previous institution do not qualify. If you have loans in these categories and wish to qualify for the 0% interest rate period that is in effect until September 30, 2020, you can still choose to consolidate them with the Department of Education.

Additionally, the CARES Act now allows the suspended payments from March-September to still count towards Income Driven Repayment Forgiveness and Public Service Loan Forgiveness as though you were still making on time payments. Additionally, if you are in the process of rehabilitating your defaulted loans, the suspended payments will also count towards your rehabilitation period.

If you wish to continue making payments during this time you are free to do so by contacting your servicer. Any payments made during this time will go directly to principle, so it’s a great time to make the payments if you can afford to do so. During this time, you can choose to pay any amount, regardless if it is more or less than your previously scheduled monthly payment.

Finally, if you are currently defaulted on your federal student loans, the Department of Education will temporarily suspend collections penalties, such as confiscation of your federal tax refunds, reduction in social security benefits, or wage garnishments. This will also remain in effect until September 30, 2020.

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