Student loan forgiveness handwritten on a blackboard.
Last week, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act to provide relief from many of the issues created by the coronavirus and President Trump signed the bill into law Friday night. Included in the many components of this $2 trillion package is a six-month relief for most student borrowers by suspending their student loan payments—interest free—through September 30, 2020. And for borrowers seeking student loan forgiveness, this bill is a big win.
In addition to suspending payments for six months, the bill allows borrowers seeking forgiveness under income-based repayment (IDR) plans and Public Service Loan Forgiveness (PSLF). However, there is a lot of confusion right now about what is included in the legislation.
Once legislation is passed, it takes some time to implement and that is causing borrowers to receive mixed messages. MyFedLoan—the loan servicer servicing the loans of those seeking PSLF—sent emails to borrowers telling them about an optional suspension of payments that won’t count towards forgiveness programs. However, that was based on Trump’s previous directive that didn’t go as far as the CARES Act. The CARES Act provides automatic suspension of payments, 0% interest, and counts towards loan forgiveness.
When borrowers go to MyFedLoan’s website they see a message explaining they have limited access to call centers due to the virus. The message also tells borrowers they are working to implement the CARES Act.
“We are working closely with the Department of Education to enact the benefits that have been announced through the CARES Act. Please know that while it may take some time for these benefits to be reflected within your account, they will be applied retroactively, so you won’t be disadvantaged by this delay.”
The message has a “learn more” link, but the information provided relates to President Trump’s previous order. However, borrowers should be patient as servicers work to implement the time. As the initial message says, they are working to implement the bill and it will be applied retroactively. The Department of Education echoed this message on a call yesterday where it told listeners they are directing loan servicers to make this retroactive to March 13th.
Despite the confusion, the legislation is clear that these non-payments will count towards forgiveness programs. The bill text reads:
“(c) CONSIDERATION OF PAYMENTS.—Notwithstanding any other provision of the Higher Education Act of 1965 (20 U.S.C. 1001 et seq.), the Secretary shall deem each month for which a loan payment was suspended under this section as if the borrower of the loan had made a payment for the purpose of any loan forgiveness program or loan rehabilitation program authorized under part D or B of title IV of the Higher Education Act of 1965 (20 U.S.C. 1087a et seq.; 1071 et seq.) for which the borrower would have otherwise qualified.”
So as long as the borrower would have otherwise qualified, these months of non-payment will count towards their required number of payments for forgiveness. In a time with new developments happening constantly, it’s easy for people to be worried that they might have missed important information. To lessen confusion, loan servicers should do their best to inform student borrowers of the work they are doing and how the new legislation impacts them.
Note: The relief under the CARES Act does not apply to private student loans or to borrowers under the old bank-based system.