Democrats and Republicans reached a compromise on Wednesday, March 25, 2020 concerning the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The compromise version of the CARES Act provides student loan borrowers with six months of temporary relief from their student loan payments.

Section 3513 of the CARES Act suspends payments on federal student loans that are held by the U.S. Department of Education through September 30, 2020. Interest will be waived for the duration of the suspension.

Only certain federal student loans are eligible. The federal student loans must be owned by the U.S. Department of Education.

Which Loans Are Eligible?

Eligible loans that are owned by the U.S. Department of Education include the following loans:

  • Loans made under the William D. Ford Federal Direct Loan Program (Direct Loans)
  • Loans made under the Federal Family Education Loan Program (FFELP) in 2008-09 and 2009-10 that were transferred to the U.S. Department of Education under the Ensuring Continued Access to Student Loans Act of 2008 (ECASLA)
  • Defaulted FFELP loans that were transferred to the U.S. Department of Education through a guarantee agency

Federal Perkins Loans and FFELP loans held by a bank, state lender or other financial institution are not eligible. Private student loans are also not eligible, but many private lenders are offering options to pause payments.

Impact of the Payments Pause on Loan Forgiveness

Student loans for which payments are suspended will be treated as though the borrower had made the payments for the purpose of loan forgiveness and loan rehabilitation programs.

The borrower will also be treated as having made the payments in reports to credit reporting agencies.

Involuntary collection of defaulted federal student loans – including wage garnishment, offset of income tax refunds and offset of Social Security benefit payments – will be suspended.

The proposal for up to $10,000 of student loan forgiveness from the House version of the legislation is not included in the compromise measure.

How to Pause Your Student Loan Payments

Borrowers of eligible federal student loans do not need to do anything to have their federal student loan payments suspended. The payments pause and interest waiver will be automatic.

Borrowers may choose to continue making payments to reduce the principal balance of their loans. Borrowers who can afford to continue making payments should consider doing so.

Borrowers of ineligible federal student loans, such as bank-owned FFELP loans and Federal Perkins Loans, have other options for pausing payments. Options include the economic hardship deferment, unemployment deferments, forbearances and income-driven repayment plans.

Borrowers of private student loans should contact their loan servicer to ask about options for suspending loan payments, which may include forbearances and partial forbearances (interest-only payments).