What is student loan relief?
On March 27th, President Trump signed the “Coronavirus Aid, Relief, and Economic Security Act’’, or the ‘‘CARES Act’’, which states that the government will waive interest and suspend payments on all student loans held by the Department of Education until September 30, 2020. On August 8th, President Trump signed an Executive order to extend this interest waiver through December 31, 2020. Education Secretary Betsy DeVos extended this program until January 31, 2021.
President Biden has further extended the 0% interest and no payments due until January 31st, 2022.
Additionally, the CARES Act introduced a measure enabling employers to make tax-free contributions to employee student loans. Below is a summary of what you need to know and the options available to you.
- For student loans held by the US government (Direct Loans and Department of Education administered FFEL loans), all payments are suspended, and all interest is paused until January 31st, 2022.
- These changes will be automatically put into place. We encourage individuals to reach out to their loan servicer to ensure these updates have been applied and that any scheduled payments towards student loans have been paused.
- If you are working towards loan forgiveness, whether through Public Service Loan Forgiveness (PSLF) or an Income Driven Repayment plan (IDR), you will still receive credit for "total on-time payments" for each monthly payment that falls in the period March 13, 2020 - January 31st, 2022 while taking advantage of the payment pause.
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What should I do given these changes?
Determine if your loans are federal, private, or both
- Begin by determining what types of loans you have. Federal loans are loans offered by the government.¹ Private student loans are loans offered by private companies, such as a local bank or other private lenders. CommonBond offers private student loans.
- If you are not sure which types of loans you have, you can reach out to your loan servicer (the company that accepts your monthly payments to your student loans). You can also check the National Student Loan Data System (login here) for a complete listing of your federal loans.
For federal student loans, consider using the payment pause to build up savings or pay down other debt
You can take advantage of the 0% interest rate on federal student loans to put yourself in a strong financial position. You can use the amount you would normally pay to towards your student loans to:
- Build up your emergency fund (experts recommend having 3-6 months of expenses saved)²
- Pay down other high-interest debt (e.g. credit cards, auto loans)
- Invest in a high-yield savings account
- Figure out which one is right for you with our Student Loan Relief Tool
For private student loans, review your options
- If you have been impacted by COVID-19, reach out to your private lender to understand what forbearance options are available to you. Forbearance may allow you to put your payments on hold for a period of time. CommonBond loans offer forbearance for borrowers.³
- If you’re in a stable financial position, consider refinancing your student loans to take advantage of historically low rates, potentially saving you time and money. Get your new rate quote today.
Set a reminder to restart your federal student loan payments
Federal student loan payments and interest are set to resume on January 31st, 2022. Though your autopay should start back up automatically, set a reminder now to ensure your payments are rescheduled at that time, so you don’t miss payments going forward and incur any late fees or penalties.
step 5:
Does your employer contribute to your student loans?
Currently, around 8%⁴ of employers offer student loan repayment as a benefit. Up until recently, this benefit was treated as income and employees were taxed on the contribution amounts. With the passage of the CARES Act on March 27th, employers are now able to make tax-free contributions to employee student loans.⁵ If you think this applies to you and your employer, or if you'd like to learn more, you can reach out to us at partnerships@commonbond.co.
Take control of your student loans
A lot has changed recently. During this time of uncertainty, the last thing you want to do is worry about your student loans. Below we've put together a guide to help you understand recent government changes and how to get relief, if you need it.