As part of the recently enacted CARES Act to assist Americans financially impacted by COVID-19, the federal government is extending relief to federal student loan borrowers by suspending payments and interest for six months. Unfortunately, this relief doesn’t apply to all borrowers with federal student loans. Certain federal loans are excluded from this relief. They are:
- Federal Family Education Loan (FFEL) Program loans owned by commercial lenders
- College-owned Perkins Loans
Many borrowers may not even realize their loans don’t qualify. That’s why it’s important to contact your loan servicer(s) directly to confirm whether or not your loans are eligible for the federal relief. If they’re not, there are alternatives that may be able to help. Let’s see what you can do:
Consolidate Your Debt
If you have FFEL or Perkins loans that aren’t covered, consider consolidating them with a federal direct consolidation loan. This moves ownership of the loans back under the Department of Education and would then qualify them for CARES Act loan relief. There are some things to take into consideration with this approach, however.
Think of consolidating your loans as a “restart.” If you are currently enrolled in a loan forgiveness program, you would lose credit for any progress you’ve made toward reaching the payment threshold. If you have Perkins loans, you would lose the option of cancellation programs unique to those loans. And finally, the consolidation could leave you with a slightly higher interest rate after the payment suspension period.
Apply for Deferment or Forbearance
Both FFEL and Perkins loans should qualify for traditional deferment or forbearance programs, which will buy you time to catch up financially.
If you have FFEL loans, ask your lender about applying for unemployment or economic hardship deferment. Keep in mind that during the months you’re not making payments, interest may still accrue.
Perkins loans borrowers have the option of unemployment or economic hardship deferment, with the added benefit of a 6-month grace period before payments are due again. Plus, no interest will accrue during this time.
Talk with Your Lender
If you have private student loans, none of the above options apply. However, that doesn’t mean you can’t find some relief. Several private lenders are offering assistance to student loan borrowers affected by the pandemic. For example, Citizens Bank is offering payment assistance for 90 days and waiving late fees. Discover is allowing student loan borrowers to suspend up to two months of payments, interest-free. And SoFi is offering a 60-day pause in payments; borrowers must apply to receive the relief. Other private lenders are providing similar assistance. Be sure to contact your lender as soon as you realize you won’t be able to make a payment.
If you would like more help figuring out the options available for student loans, talk with one of our certified counselors. They will be able to help you determine your best choice now, as well as map out a path for a manageable repayment solution following the pandemic.