Student Debt – Cares Act 2020 Flyer
1. What are the major changes in the CARES Act regarding student loans?
- No federal student loan payments till September 30, 2020;
- No interest (interest rate will drop to ZERO) on your federal student loan payments;
- Your FICO score won’t be affected
- No garnishment of wages, Social Security and tax refunds for student loan debt collection for those in default.
2. Can I continue to pay my federal student loans if I have additional cashflow?
Yes. If you want to keep paying, you can do that. Instead of interest, all the money will go toward paying down the principal.
3. Does the CARES Act include any student loan forgiveness clause?
There is no direct student loan forgiveness in the CARES Act.
4. If I pause payments, will this have any impact on loan forgiveness for my income-driven repayment plans?
The non-payments are considered as “forgiven” payments and will continue to be counted towards the 20 or 25 year term. Don’t worry!
5. What relief is offered for private student loans?
Nothing! The CARES Act only applies to student loans owned by the Federal government.
6. What about relief on debt repayment assistance from the company?
The CARES Act allows employers to assist loan repayment up to $5,250. This includes public loans, private loans, tuition reimbursements but not dependent loans. The loan repayment assistance is tax deductible to the company and tax free to the employees. This program is set to expire on 12/31/2020, but we think there is a high chance that it will get extended since it is an election year.
7. Are all federal student loan payments suspended?
No, the suspension of federal student loan payments only applies to student loans owned by the federal government. It does not include Perkins Loans and some Federal Family Education Loans (FFEL). You can contact your student loan servicer to check which of your federal student loans qualify.
8. Do I need to apply to suspend my federal student loan payments?
No, it’s automatic. Your federal student loan servicer will suspend federal student loan payments for you. Your interest rate has been automatically set to 0%.
If you have defaulted on your student loans, garnishment of wages, Social Security benefits and tax refunds will also automatically stop.
9. My income has changed. Can I lower my student loan payment?
Consider an income-driven repayment plan for your federal student loans. If you make on-time payment, after 20 to 25 years, the remaining loan will be forgiven.
10. Should I refinance my student loans now?
With the CARES Act 2020, interest is being suspended till September 30, 2020. You should wait until after that date before you refinance. You won’t be able to better than ZERO percent interest!