COVID-19 and Student Loans: Your One-Stop Information Hub

It’s been over a year since the first known COVID-19 patient was confirmed in the U.S. Since then, many Americans have lost loved ones and endured a year of unknowns that included isolation and complete changes to our personal and professional status quos.

This outbreak left many Americans struggling to make ends meet due to lost wages. It’s also further highlighted the severity of the student loan crisis, opening the door to unprecedented relief measures for many student loan borrowers (but not all).

With so many programs and updates, we’ve created this information hub to answer common questions about COVID-19 student loan relief all in one place.

COVID student loan relief programs

Are student loan payments suspended during the COVID-19 pandemic?

Federal student loan payments are temporarily suspended from March 13, 2020 through August 29, 2023.

Even though they aren’t required, some borrowers might benefit from making student loan payments during administrative forbearance. This might be the case if you aren’t pursuing loan forgiveness and don’t need to prioritize other financial necessities, like building your emergency fund.

Although the payment freeze is set to expire at the end of September, this plan could change. If it does, we’ll keep you updated. Additionally, you should receive your billing statement or other notification at least 21 days before your payments resume.

Are all federal student loans included in the payment freeze?

Unfortunately, not all federal student loans are eligible for the COVID-19 payment suspension. Millions of student loan borrowers were left out of this important relief measure, including those with private student loans or federal loans that aren’t owned by the Department of Education.

Eligible loans include defaulted and non-defaulted:

• Direct Loans
• The Federal Family Education Loan (FFEL)
• Federal Perkins Loans
• The Health Education Assistance Loan (HEAL)

However, FFEL and HEAL debt that are owned by commercial lenders don’t qualify for the interest rate relief. Perkins Loans owned by your school aren’t eligible either.

What’s the interest rate on federally owned student loans during the pandemic?

All federal student loans owned by the Department of Education are temporarily set at a 0% interest rate. This means your eligible loans haven’t accrued any interest since the freeze began on March 13, 2020.

Be aware that depending on your situation, the interest that accrued on your loans prior to March 13 could capitalize at the end of the payment freeze. This shouldn’t be the case if you were up to date on your payments. But borrowers who were in deferment, forbearance or in their grace period should check with their loan servicer.

Can I get a refund for student loan payments made during the payment freeze?

Yes, you can request a refund from your federal loan servicer for any payments made during the suspension period beginning on March 13, 2020.

A refund can be issued for an automatic payment that was taken out before loan servicers were able to respond to the initial freeze announcement or for any manual payments you made yourself.

If you’re on track for loan forgiveness, you should take advantage of this refund opportunity and use the money for immediate financial needs. Months of non-payment during the federal pandemic forbearance period still count toward forgiveness.

What should I do if I can’t afford my payment once the freeze expires?

If your financial situation has changed, you might be eligible to lower your monthly payment under an income-driven repayment (IDR) plan. In fact, your payment could be as low as $0.

IDR plans require annual recertification of your income and family size. But if you’re currently enrolled, you won’t need to recertify before the end of the payment freeze. Contact your loan servicer for an updated recertification due date.

Are private student loan lenders offering relief options?

Some private lenders normally offer options to pause payments for a set period of time for borrowers experiencing financial hardship. But many lenders are offering additional COVID relief options, including emergency forbearance or waiving fees for late payments.

Here are examples of what some of our partner lenders are offering their borrowers:

• Ascent’s newest natural disaster/declared emergency forbearance provides up to three months of paused payments. This option doesn’t count against your other forbearance options, so you’ll still have access to its temporary hardship forbearance and administrative forbearance if needed in the future.
• Earnest is offering short-term coronavirus forbearance for at least one full month. It also has a short-term, interest-only program that will allow you to make a lower (interest only) payment on your loan for up to 90 days.

Contact your student loan lender to discuss available options. Be sure to explicitly state that you are being financially impacted by COVID and need relief.

Student loan forgiveness and cancelation

What student loan forgiveness programs are available?

The existing federal student loan forgiveness programs are still available, including Public Service Loan Forgiveness (PSLF), Teacher Loan Forgiveness and IDR forgiveness.

There are also ongoing discussions in Washington D.C. about student loan cancelation. Many proposals have been put on the table, but student loans were left out of recent stimulus plans. This signals that student loans aren’t a priority among the remaining COVID relief measures.

We’ll update you on any viable student loan cancelation plans as they come to fruition. Additionally, Student Loan Planner® founder, Travis Hornsby, sends weekly email newsletters that include his thoughts on all things student loans. If you want some behind-the-scenes insight into student loan cancelation discussions, be sure to sign up for the weekly update.

Related: How President Biden’s Student Loan Forgiveness Proposals Could Affect You

How does COVID-19 affect student loan forgiveness?

If you’re working toward PSLF or IDR forgiveness, each of your suspended payments will count toward forgiveness. So, each of your $0 payments from March 13, 2020, to September 31, 2021, will be added to your overall payment count.

PSLF borrowers are required to make 120 qualifying payments before having their remaining balance forgiven tax-free. Whereas, borrowers on an IDR plan must make 20 to 25 years’ worth of qualifying payments before having their debt wiped away.

Refinancing opportunities in the midst of chaos

Should I refinance my existing federal or private student loans?

Student loan borrowers have had access to historically low interest rates throughout the pandemic. If you plan to pay back your federal and private student loans in full while locking in low rates, refinancing can help redirect your money toward other goals, like investing. You can even score cash-back bonuses of $1,000+ through our partner lenders.

However, many federal borrowers have chosen to wait to refinance until after the payment freeze expires. This is a smart strategy if you plan to pay back your loans within the next five years as you’ll be able to take full advantage of the payment and interest suspension.

Keep in mind that if you wait too long, you run the risk of missing out on super low refinancing rates.

Related: When You Should Consolidate or Refinance Your Student Loans During COVID-19

Other COVID-related developments

Check out these additional resources for coronavirus-related resources and information.

• How to Get COVID-19 Underemployment Benefits
• How to Get Student Loan Unemployment Deferment
• How to Invest During a Recession and COVID-19
• If You Lost Your Income, You Care A Lot More About the Economy than COVID-19

It’s been a tough year and some change. Let us know if we can answer any questions about student loans and COVID.