Student loan expert Adam Minsky’s 4 tips for the coronavirus pandemic
Updated May 29, 2020
As the economic fallout from the coronavirus pandemic continues, millions of student loan borrowers grapple with their debt. Congress has enacted significant relief programs for student loan borrowers, and new proposals may extend that relief. Some states have also tried to help student loan borrowers through their own unique initiatives.
But this confusing patchwork of options, in addition to an already complicated student loan system, has left many borrowers in the dark. Here’s what you need to know:
CARES relief – find out if you qualify
In April, Congress enacted the CARES Act, which provides essential student loan relief to millions of borrowers. The Coronavirus Relief Act suspends all payments, stops all accrued interest, and ends collection efforts on all federal student loans held by the Department of Education.
Of course, the details matter. Not all student loans are federal, and not all federal student loans are government owned. The relief was enacted automatically, so it’s likely that if you qualify, your payments and interest have already been suspended. If you are unsure, you can check the Department of Education’s Federal Loans Database at Studentaid.gov.
For student loan borrowers on track for loan forgiveness programs like the civil service loan forgiveness, suspended payment months should still count towards loan forgiveness, even if no payment is made.
For borrowers who are on track for a possible loan repayment, making voluntary payments during the suspended interest period (even if you don’t have to) could save you money in the long run. term, because every payment you make will go entirely to your loan balance.
For other student loans, contact your lender or manager
While the protections of the CARES Act are important, millions of borrowers with federal FFEL program loans held for business purposes and private student loans are not covered. However, these borrowers may still have options.
Several states have formalized voluntary agreements with lenders and private student loan services to provide temporary relief to borrowers in response to the pandemic. This relief may include a temporary suspension of payments, temporarily changed repayment terms and a waiver of late fees. Not all states – and all private lenders and service providers – participate. Borrowers should contact their lenders or agents for more information.
Borrowers should also educate themselves about the terms, conditions and consequences of any temporary relief. In some cases, interest may still accrue even though no payment is due. This can lead to higher monthly payments at the end of the abstention or a longer repayment period.
Pull your credit report
There are reports of student loan managers incorrectly reporting loan statuses to credit bureaus in response to coronavirus abstentions, resulting in credit damage. Student loan advocates recently filed a class action lawsuit alleging widespread errors in credit reports.
Under the Fair Credit Reporting Act (FCRA), all consumers are entitled to a free credit report each year from each of the three major credit reporting agencies. The Annual Credit Report offers a free credit report every week until April 2021. [Note: This has been extended to April 2022.] Borrowers may want to extract and review their credit reports periodically and dispute any inaccurate or erroneous information.
The landscape surrounding student loan relief in response to COVID-19 is changing rapidly. There are at least five major student loan relief proposals under consideration in Congress.
The House recently passed the HEROES Act, which would significantly expand the protections of the CARES Act and also offer a student loan discount to financially troubled borrowers. While the odds of the HEROES bill being passed by the Senate are low, Congress will continue to consider student loan relief proposals over the coming months. So stay tuned.
Adam Minsky is a leading lawyer and expert in student loan law. He runs a firm dedicated to helping student borrowers with debt and, among other work, contributes to the National Consumer Law Center’s manual, “Student Loan Law”.