Student loans during the coronavirus crisis

There’s a light at the end of the tunnel of the coronavirus pandemic, but that doesn’t change the fact that many people across the U.S. have been struggling with stagnant income and rising inflation. The good news is that there are still policies to help people financially weather the crisis, including programs that can help borrowers suspend student loan payments.

If you’re concerned about making your next payment on a federal or private student loan due to the coronavirus, know your options.

How COVID-19 has affected student loans

Student loans were one of the first areas to be addressed when the pandemic hit. The Coronavirus Aid, Relief, and Economic Security (CARES) Act, signed into law in March 2020, allowed borrowers to suspend payments on federal student loans, automatically waived interest on those loans and suspended collection attempts, wage garnishments and tax refund seizures on defaulted federal student loans.

This relief was due to last only six months, but it was extended multiple times. Currently, federal student loan payments, interest charges and collections activities are waived until 60 days after the debt relief program is cleared for implementation or once related litigation is resolved in court. If neither happens by June 30, 2023, payments will resume 60 days after that date..

Which student loans are affected?

Only student loans held by the federal government and defaulted Federal Family Education Loan (FFEL) Program loans are eligible for the moratorium on payments, interest and collections. Noncovered federal loans include federal Perkins Loans held by individual colleges and universities, as well as older loans under the FFEL Program that are held by private companies and are in good standing.

Eligible loans include:

• Direct Loans owned by the U.S. Department of Education.
• FFEL Program loans owned by the U.S. Department of Education.
• Federal Perkins Loans owned by the U.S. Department of Education.
• Defaulted FFEL Program loans managed by guaranty agencies.
• Defaulted HEAL loans owned by the U.S. Department of Education.

What if you’re pursuing PSLF?

The Public Service Loan Forgiveness (PSLF) program requires that applicants make 120 qualifying monthly payments, among other requirements, to get approved.

Fortunately, borrowers pursuing PSLF don’t have to worry about making payments during this time. The stimulus package included a provision to count suspended payments during the moratorium period toward PSLF eligibility — so even if you skip payments through December, each month will be counted as though you made a payment toward PSLF as long as you work full-time for an eligible employer during that time.

Additionally, the Biden administration overhauled the PSLF program to make it easier for eligible borrowers to qualify for forgiveness. The Department of Education announced a limited PSLF waiver in 2021 that would allow more types of payments to be eligible for the program. The waiver, which lasted through October 2022, made many more borrowers eligible for eventual forgiveness.

Here are some other changes that impacted the program:

• Active-duty service members can count deferments and forbearances toward PSLF.
• Military service members and federal employees are automatically credited using federal data matches.
• Late payments and partial payments will now count toward PSLF.
• Payments made before consolidation will now count toward PSLF.
• Previously denied PSLF applications will be reviewed for errors, and borrowers can have their determinations reconsidered.

Are private student loans suspended?

Private student loans aren’t eligible for student loan COVID-19 relief because the federal government doesn’t hold those loans. However, on the heels of the CARES Act, several private lenders and loan servicers offered relief options, such as special 90-day COVID-19 forbearances.

Whether or not those programs are still available depends on the lender and your situation. Here’s how you can request help.

1. Call your loan servicer: When you call or email your loan servicer, explain your financial situation and how this crisis has impacted you. For example, you or your partner may have been laid off or furloughed, or you might have concerns about your future ability to make your student loan payments. Tell your lender when you anticipate being able to resume loan payments.
2. Ask about assistance programs: Your options depend on the servicer and your situation. For example, your loan servicer may offer to suspend payments for a few months, temporarily lower your interest rate or offer interest-only payments. Some servicers treat each situation on a case-by-case basis.
3. Ask questions: Before agreeing to start the program, confirm the exact details, such as fees, how long the relief lasts and whether interest accrues. You also should find out whether that interest “capitalizes” — gets added to the unpaid principal balance. Create a plan for how you’ll resume payments at the end of the forbearance period.
4. Enroll in your loan servicer’s program: Ask for the details in writing and complete the process to enroll in your loan servicer’s program. Make sure that you receive confirmation that you’ve been enrolled before you stop making payments.
5. Consider refinancing: With current low interest rates, borrowers may be able to save money by refinancing private student loans. Shop around for the best rate if you’re considering this move. Refinancing can help you save a substantial amount of money if you can shave a percentage point or two off your current interest rate. It can also help if the new lender offers more flexible hardship options than your current lender.

Enrolling in plans that suspend or lower payments ultimately extends the life of the loan, which costs you more in interest overall. If you can afford to keep making payments as scheduled, it may be in your best interest.

Private student loan lenders offering relief

Below is a list of private lenders offering some relief to borrowers as of Jan. 19, 2022. If your lender is not listed here, we recommend checking your lender’s website or reaching out by phone.

• Citizens Bank says private student loan borrowers can call the bank at 866-259-3767 for information about their options.
• College Ave says that borrowers may be eligible for its forbearance program. To see if you’re eligible, call College Ave at 844-803-0736. It is not able to process requests via email or chat.
• Discover private student loan borrowers can call the bank at 800-788-3368 to discuss hardship options.
• Earnest borrowers can apply for a short-term forbearance program via Earnest’s email portal. Entering this program makes your eligible loans current and postpones payments for at least one month. Interest accrues while your payments are postponed, but it won’t be capitalized at the end of forbearance.
• Laurel Road discontinued its COVID-19 response in June 2021.
• LendKey, which partners with banks and credit unions to help borrowers refinance student loans, says that borrowers may submit a forbearance application in their online account or reach out to care@lendkey.com. You may also call your loan servicer with questions and to discuss hardship options.
• Sallie Mae borrowers can chat with the lender about private student loans online or by calling 833-558-6577 to see what assistance options may make sense.

Should I refinance my student loans now?

Student loan refinance interest rates plunged to record lows in 2020 and 2021, prompting some borrowers to wonder if it’s worth it to refinance. If you have private student loans, you don’t have to worry about some of the drawbacks, so it may be a no-brainer if you can get better terms than what you have now.

But if you have federal loans, you’ll want to think twice, at least until current coronavirus relief measures expire.

Pros of refinancing

• Refinancing could help you qualify for a lower interest rate than you currently have.
• You’ll have flexibility with your repayment options, with terms ranging from five to 20 years.
• You can choose a new lender based on the features you want and your repayment goals.

Cons of refinancing

• If you refinance federal student loans, you’ll lose access to the coronavirus payment suspension period.
• Refinancing federal student loans causes you to lose other federal benefits, including access to forgiveness programs and income-driven repayment plans.
• You typically need a high credit score and income to qualify for the best rates, so there’s no guarantee that you’ll get a better arrangement than what you have now.

What does student loan relief look like with the coronavirus behind us?

The Biden administration announced in January 2023 its plans to end both the pandemic national state of emergency and public health emergency on May 11, 2023.

Many borrowers are waiting for the Supreme Court to weigh in on Biden’s student loan debt relief plan, which may forgive as much as $20,000 in debt for some. Within 60 days of that decision, or within 60 days of June 30– whichever comes first– repayment is due to begin again.

If you struggle to make payments once pandemic forbearance has ended, contact your loan servicer to inquire about hardship options.

The bottom line

While federal student loans continue to have loan payments suspended, collections stopped and interest waived due to pandemic relief measures, many private student loan lenders also provide options.

If you are experiencing economic or other hardship in the wake of the coronavirus crisis, know that you do have options. The first step is reaching out to your student loan lender or servicer to see what options are available to you.

Even if you can take advantage of a forbearance program, it usually doesn’t make sense unless you need to. Going into forbearance will extend the length of your loan, and it may cause you to pay additional interest throughout your loan.