The Coronavirus Aid, Relief and Economic Security Act (CARES Act) offers some relief for borrowers seeking student loan repayment delays. It is expected to take some time for the benefits to be reflected in borrowers’ accounts, but there are indications that relief will be applied retroactively. Information is still unclear regarding the program and more guidance is expected in the near future.
According to Student Loan Borrower Assistance (SLBA), payments will be suspended from March 13, 2020 through September 30, 2020. Loan servicers will cease automatic payments during this period. No additional interest will accrue as a result, although there is confusion about how interest will be calculated in the future.
Additionally, there are many limitations. Not every loan classified as a student loan is eligible. The CARES Act generally addresses only Direct Loans and Federal Family Education Loans currently owned by the U.S. Department of Education. Neither Perkins Loans nor commercially held FFELs are covered. According to SLBA, private student loans are not covered and about 9 million federal student loan borrowers have at least one loan not covered under this program.
A key provision also addresses credit reporting. If you do have a loan suspended under the program, it will not be reported as a default, but as a regularly scheduled payment. This is good news for students concerned about their credit report.
Visit Student Loan Borrower Assistance and the Education Department for more details.