Lots of information out there about the new CARES Act and what it purports to do. It’s a huge document and has a lot of moving parts. In an attempt to pull out useful information for the average consumer and small business owner, we are working on a series of blog posts to help answer some questions.
Student loans are discussed in § 3513 of the bill and there is some relief available, provided your loans are Direct Loans or FFEL loans owned by the U.S. Department of Education. Private loans, Perkins Loans, and FFEL loans not owned by the U.S. Department of Education are not protected by the CARES Act.
If your loan is covered, payments are suspended through September 30, 2020 and no interest accrues during that time. The suspension months also count towards forgiveness programs if you are enrolled in one.
In addition, if you have a wage garnishment or your tax refund is subject to interception for delinquent student loans, those collection efforts are suspended. Credit reporting during this time period is also included in this section and any payment that is suspended is treated as if the regularly scheduled payment had been made by the borrower.
Starting on August 1, 2020, suspended student loan borrowers will receive notices regarding when the normal payment obligations will start again and that the borrower has the option to enroll in income-driven repayment options at that time.
If your loan is not covered under this program, you will want to reach out to your lender or servicer to discuss forbearance options, the terms of a forbearance, and how to apply. Also, it is very important that you find out how the forbearance will be reported on your credit and understand how it may affect your future ability to obtain credit.
This is just a basic overview and is not legal advice specific to your situation. If you have questions about your rights when it comes to debt and credit, you should speak with an attorney in your area for legal advice. If you live in California or North Dakota and would like to speak with Jen Lee Law regarding your situation, please schedule an appointment.
