Student Loan Borrowers & College Students Get Relief Under CARES Act - Will it Help?

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law by President Donald Trump on March 27, 2020, and it includes provisions aimed at providing relief to student loan borrowers & current college students. Here’s what you need to know:

Student Loan Borrowers

• Borrowers with student loans that were originated by the federal government and are currently held by the federal government will see their loans temporarily suspended ― interest-free ― through September 30th. Essentially, your student loans will be frozen and prevented from accruing interest until October.
• The suspension is retroactive to March 13th. Federal student loan servicers are in the process of adjusting loan balances to apply the waiver and remove interest accrued the second half of March.
• Eligible loans include all Direct and Direct Parent PLUS loans that were taken out since 2010.
• Most Federal Family Education Loan (FFEL) Program and Perkins loans (which are held by colleges & universities) don’t qualify ― although the roughly 10% of FFEL & Perkins loans that the Dept. of Education purchased during the last recession are eligible.
• If you have eligible student loans, you don’t need to do anything to activate the suspension ― it’s automatically applied by your loan servicer. That being said, it’s probably worthwhile to check your statements in the weeks to come to verify. 
• If you’re unsure what kind of student loan you have, you can contact your student loan servicer or check StudentAid.gov to see whether the Dept. of Education is the lender (in which case your loans are eligible).
• If you have eligible loans but want to continue making payments during the suspension period you’re able to do so without “deactivating” the suspension of interest, and by chipping away at the principal you will be in a better position when October comes around.

Employer Repayment Assistance

• Employers are permitted by the CARES Act to make tax-free contributions to the repayment of employees’ student loans, totaling up to $5,250 annually, through the end of the year.
• The contributions would be excluded from the employee’s income for tax purposes.
• The $5,250 cap applies to both the new student loan repayment benefit and other educational assistance (for tuition, fees, books) that is allowed under current law.
• (While this provision allowing tax-free student loan repayment contributions from employers to employees is only active until January 1, 2021, it will likely be considered for inclusion in the annual package of tax extenders Congress approves at the end of each year.)

Current College Students

• Students who dropped out of school because of the coronavirus pandemic will have the current term excluded from counting toward their lifetime eligibility for subsidized student loans.
• The current term will also be excluded from counting toward their lifetime Pell grant eligibility, and won’t be required to return Pell grants from the current term.
• Additionally, students’ grades from the current term won’t affect their federal academic requirements in terms of their eligibility to continue to receive Pell grants or student loans in the future.
• Higher education institutions can transfer unused work-study funds for use as supplemental grants. Work-study payments can be issued to students unable to work due to workplace closures as a lump sum or in payments similar to paychecks.
• Institutions can award additional Supplemental Educational Opportunity Grants for Emergency Aid to students impacted by the coronavirus pandemic.

RESOURCES

• StudentAid.gov
• Marketplace
• Countable - CARES Act

— Eric Revell

(Photo Credit: iStock.com / alexsl)