Answers about the Student Loan Payment Pause

Facebook icon Twitter icon Print icon Email icon
Mark Kantrowitz

By Mark Kantrowitz

April 27, 2020

You’ve got questions, we’ve got answers. During our webinar about the Impact of Coronavirus on Paying for College, participants asked dozens of questions. Here are the answers to these questions relating to the student loan payment pause and interest waiver.

[Update: The U.S. Department of Education has extended the payment pause and interest waiver through December 31, 2020.]

Does the interest waiver apply to federal student loans in deferment?

Interest is waived for all eligible federal student loans, not just loans in active repayment. Even federal student loans in an in-school or grace period and other deferments and forbearances will have their interest rates set to zero.

Is the payment pause and interest waiver automatic, or do we have to apply? Do you know where to apply?

The payment pause and interest waiver is automatic for federal student loans. You do not need to apply for the payment pause and interest waiver. It is, however, a good idea to login to the loan servicer’s loan portal to make sure your loan payments have been suspended and your interest rate set to zero.

For those of us who are seeking Public Service Loan Forgiveness, if our monthly payments are on hold as confirmed by FedLoan Servicing, then are we still getting credit each month to count toward our forgiveness?

Yes. Public Service Loan Forgiveness counts the paused payments as though they were actual payments. Instead of making 120 qualifying payments, you now only need to make 114. However, you have to still be working in a qualifying public service job. If you lose your job, then the paused payments do not count toward the loan forgiveness.

With the 6-month CARES Act forbearance, should the same income-driven repayment plan payments be directed toward highest interest loans and will it be applied first to any interest that accrued before March 13, 2020?

Borrowers who are seeking loan forgiveness should not make any extra payments on their loans, since this will reduce the amount of loan forgiveness they eventually receive.

The main exception is for a borrower who is not pursuing public service loan forgiveness and whose income is high enough that the debt will be paid off before reaching the 20 or 25-year forgiveness point on their income-driven repayment plan. Then, making extra payments will save them interest over the life of the loan.

If some interest had accrued prior to the March 13, 2020 start of the payment pause and interest waiver, any payments made will be applied first to the accrued but unpaid interest before the remainder is applied to the principal balance of the loan.

From what I understand the April through September payments for our student loans are “not needed to be made by us” (no automatic withdrawal). Does that mean they are paid and the balance will go down, or will the balance owed at the end of September be the same as it was in April prior to this starting?

The payment pause and interest waiver freezes the loans, with no new interest charged and no payments required until September 30, 2020. The balance owed at the end of September will be the same as it is today. Auto debit payments are also suspended. Borrowers can make payments if they wish, which will go entirely to principal (other than any interest that accrued prior to March 13, 2020 and which remains unpaid), but are not required to do so.

If my student loan was already in default, how do the payment pause and interest waiver affect me?

The interest waiver sets the interest rate to zero through September 30, 2020, even on a defaulted federal student loan. In addition, collection activities are suspended on defaulted federal education loans, including wage garnishment, offset of federal income tax refunds and offset of Social Security retirement and disability benefit payments, from March 13, 2020 through September 30, 2020.

A good place to start:

See the best 529 plans, personalized for you