What The Coronavirus Stimulus Means For Your Student Loans

Help is on the way for your student loans.

Here’s what you need to know – and what to do about it.

Student Loan Repayment

The CARES Act, which is the new $2 trillion stimulus bill to help those impacted by coronavirus, directly helps borrowers with student loans and provide financial relief. Let’s clearly understand what is included (and not included) so you can make an informed decision about your student loans. These student loan repayment efforts are in addition to Trump’s paid sick leave plan.

What’s Included

There are five primary areas that impact your student loans:

1. Stop paying your federal student loans

The CARES Act allows you to stop paying your federal student loans from now through September 30, 2020. Previously, President Donald Trump also announced that you have an option to stop paying your federal student loans for 60 days. You don’t have to stop paying your federal student loans, however, but you have the option. What happens after September 30, 2020? Absent an extension, you would resume paying your federal student loans in the normal course. Also, your student loan balance will not change between now and September 30, meaning the federal government is not paying your student loans for you.

2. No interest on federal student loans

This is a big one. The CARES Act waives student loan interest on your federal student loans through September 30, 2020. Donald Trump previously announced through executive action that he is waiving interest on federal student loans. If you decide not to pay your federal student loans during this period, your federal student loan interest rate will be set to 0% and you won’t be penalized with any interest accrual.

3. Skipping payments counts for Public Service Loan Forgiveness

The Public Service Loan Forgiveness program requires 120 monthly student loan payments, although the payments do not have to be consecutive. If you are pursuing public service loan forgiveness, and decide to skip payments through September 30, 2020, the skipped payments will count toward toward the required 120 monthly payments.

4. Tax-Free employer contributions for student loans

If your employer pays student loans as an employee benefit, there’s more good news in the CARES Act. Now, your employer can pay up to $5,250 of your student loans tax-free to your employer this year.

5. Suspension of Student Loan Debt Collection

The CARES Act also stops involuntary collection of student loan debt during this period, including garnishment of wages, tax refunds and Social Security benefits. Earlier this month, Trump stopped collection of student loan debt from 9 million student loan borrowers who have defaulted on their federal student loans. New York Governor Andrew Cuomo temporarily suspended collection of student loan debt and also suspended mortgage payments for those facing financial difficulty.

What’s Not Included

There are several important areas not addressed in the CARES Act that can impact your student loan:

Private Student Loans

The temporary student loan relief applies to federal student loans only and to private student loans. So, the interest rate on your private student loans will not become 0% through September 30, 2020. Similarly, your private student loans are payable based on your normal payment schedule. If you’re struggling to pay off private student loans, you can contact your lender and student loan servicer to discuss potential options.

Student Loan Forgiveness

The CARES Act does not provide for any student loan forgiveness. Senate Democrats proposed a student loan forgiveness plan that would forgive at least $10,000 of federal student loans for all borrowers. Former Vice President Joe Biden also called for $10,000 of student loan forgiveness. Biden has his own $750 billion student loan plan, which is centered on income-driven repayment. House Democrats called for $30,000 of student loan forgiveness. These student loan forgiveness efforts asked for amount much smaller than those proposed by Sen. Elizabeth Warren’s original student loan forgiveness plan to cancel student loan debt. Sen. Bernie Sanders (I-VT) also proposed forgiving all $1.6 trillion of student loan debt, including both federal and private student loans.

Options For Your Student Loans

What else can you do to pay off your student loans more quickly and save money during this challenging period? Here are four options, all of which have no fees: