The CARES Act Suspends Federal Student Loan Payments
On March 27, 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Included in the legislation are new rules for student loan relief.
The legislation provides a six-month automatic payment suspension for any student loan held by the federal government. This six-month period ends on September 30, 2020.
If you have a federal student loan, you don’t need to contact your loan servicer to request a suspension; the six-month freeze will be applied automatically to any eligible federal student loan. However, you can choose to keep making your monthly student loan payments during the six-month suspension period if you wish.
Interest will not accrue during the six-month suspension period. In effect, the interest rate is set to 0%.
Only Federal Loans Qualify
Only student loans held by the federal government are eligible for payment suspension. This includes Direct Loans (which includes PLUS Loans), as well as Federal Perkins Loans and Federal Family Education Loan (FFEL) Program loans held by the Department of Education. Private student loans are not eligible.
Impact on Public Service Loan Forgiveness Program
Under the Public Service Loan Forgiveness (PSLF) Program, borrowers who work in an eligible public service job and make 120 on-time student loan payments are eligible to have the remaining balance on their federal Direct Loans forgiven.
Under the CARES Act, the six-month freeze on student loan payments will not affect the 120-month running period for purposes of the PSLF program. In other words, each month of the suspension period will still count toward a borrower’s 120 payment tally, even if the borrower does not make any payments during the six-month period.
How to Contact Your Loan Servicer
Your federal loan servicer is the company that handles your loan’s billing and provides related services. If you want to contact your loan servicer for any reason you should try to do so online or by phone. If you don’t know the name of your loan servicer or how to contact the company, you can visit studentaid.gov/login or call 1-800-4-FED-AID for assistance.
IMPORTANT DISCLOSURES Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, legal, or retirement advice or recommendations. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.
South State Advisory, Inc., a wholly-owned subsidiary of South State Bank, also does business under the name South State Retirement Plan Services. Investments offered are not deposits of this institution and therefore are not insured or guaranteed by the FDIC or any government agency, and may lose value. We do not provide legal, tax or accounting advice. Individual investment advice is dependent on your specific circumstances.