Finding relief for student loan debt became even more pressing during the economic disruptions surrounding the pandemic. But the student loan forbearance measure that put loan repayments on hold through the pandemic has been extended repeatedly and is still in effect pending court challenges to a separate proposal on student loan forgiveness.
- The U.S. federal government's CARES Act gave student loan borrowers forbearance.
- Under the law, loans don't accrue interest, payments aren't required, and there are no late fees, among other provisions.
- Your wages, tax refund, and Social Security payments can't be garnished if you're behind on a federal student loan.
- Borrowers who need relief on private student loans or commercial student loans may be eligible, but it isn't as straightforward.
- During pandemic-related forbearance, debt collectors may not try to collect payments on federal student loans.
Student Loan Relief Extended
The latest student loan relief measure, announced on Nov. 22, 2022, extends the pause in student loan repayment until one of the following two dates:
- 60 days after the Supreme Court rules on lower-court orders that have prevented the federal government from implementing a separate program to forgive some student debt owed by millions of Americans, or,
- 60 days after June 30, 2023, if the Court does not resolve the issue by that date.
Automatic Federal Student Loan Forbearance
The Coronavirus Aid, Relief and Economic Security (CARES) Act grants federal student loan borrowers automatic administrative forbearance if the U.S. Department of Education owns the loans. What does this mean?
Originally passed on March 13, 2020, the White House extended its pause on required student loan repayments into 2023. The expiration date is tied to a separate proposed student loan forgiveness program, which has been challenged in court. The new due date will be 60 days after the Supreme Court rules on the debt forgiveness plan or 60 days after June 30, 2023, if the Court does not rule by then.
The loan forbearance program means:
- Your interest rate is 0%.
- You don't have to make payments.
- You can continue to make full or partial payments during this time if you choose to do so.
- You're not charged any late fees.
- Interest doesn't accrue.
- The interest you owed on March 12, 2020, will not be added to your principal balance.
- You don't have to contact your loan servicer to request these benefits if you're eligible for them.
When you log in to your student loan account or look at your student loan statement, it should show an interest rate of 0% if you receive the benefit. If your rate is not 0%, double-check that your servicer didn't make a mistake. Here's how to determine if you should be getting this rate.
The American Rescue Plan, passed by Congress and signed by President Biden in March 2021, includes a provision that student loan forgiveness issued between Jan. 1, 2021, and Dec. 31, 2025, will not be taxable to the recipient.
Education Department–Owned Loans
If you have one of the following loans, there's a good chance it's owned by the Department of Education and that you qualify for 0% interest:
- Defaulted and non-defaulted Direct Loans (including parent and graduate student PLUS loans)
- Defaulted and non-defaulted FEFL loans owned by the Department of Education
- Defaulted FFEL Program loans not held by the Department of Education
- Defaulted and non-defaulted Federal Perkins Loans owned by the Department of Education
- Defaulted Health Education Assistance Loans
The first category, Direct Loans, is a slam dunk. The Department of Education is always the lender. Even so, your servicer may be one of the nine companies that collect student loan payments and handle administrative matters for the government.
Health Education Assistance or HEAL loans were discontinued in 1998, so if your loans are newer than that, you may not have heard of the program.
If You Don't Know Who Owns the Loan
The following three loan categories are not necessarily Department of Education-owned: Commercial lenders sometimes own:
- Federal Family Education Loan Program (FFELP) loans, which are sometimes owned by commercial lenders
- Health Education Assistance Loans (HEALs), which are sometimes owned by commercial lenders
- Perkins loans, which may be owned by some schools.
If you don't see that 0% interest rate on your account, contact your student loan servicer (the company that takes your payments) and ask who owns your loans. If you don't want to call or email, try logging into your account and looking for your loan details.
Let's say your servicer is Nelnet, one of the biggest student loan servicers. Within your Nelnet account, you can click on "Loan Details" to see a list of all your loans. This list won't show you who owns your loans, though. To get that information, you'll need to pick one of your loans from the drop-down box.
If your servicer says you're not eligible, don't take their word for it. You should always act as your advocate. Student loan servicers have a poor reputation for acting in borrowers' best interests. To be fair, why should they? The government or the investors who own your loans are their customers—not you. They basically act as debt collectors for their clients, which is how they earn money.
Do your own research to make sure. Besides logging in to your account at your servicer's website and poking around, you can also get information about your loans from StudentAid.gov. If you don't have an account yet, spend a few minutes creating one. Once you've logged in, you can view the details of your loans. You might find details here that you couldn't find on your servicer's site.
If the student loan holder is anybody other than the U.S. Department of Education or within the extended Federal Family Education Loan program, the loan is not eligible for the CARES Act's payment pause and interest waiver.
The Confusing Case of FFELP Loans
Maybe you had Stafford loans, a type of FFELP loan that hasn't been issued since they were replaced by Direct loans in 2010. FFELP loans were federal loans, but they were issued by private lenders. Who owns them now? Sometimes, it's the Department of Education—and that means you get the CARES Act relief. Other times, it's a commercial lender, and you won't qualify for CARES Act relief.
Let's say you've found the part of your servicer's website that says who owns your loans, and you see something like this:
- Current Owner: NELNET FEDERAL LOAN TRUST
- Guarantor: PA HIGHER EDUCATION ASSISTANCE AGENCY
Does "Federal Loan Trust" in the name mean the federal government—that is, the Department of Education—owns your loan and you should be getting automatic administrative forbearance?
Unfortunately, the answer is no. "If a Stafford FFELP loan is owned by Navient Federal Loan Trust, it is not owned by the U.S. Department of Education and therefore is not eligible for the payment pause and interest waiver," said Mark Kantrowitz, publisher and VP of research for Savingforcollege.com and one of the country's leading experts on student loans. (Navient left the Department of Education student loan program in September 2021.)
Why You Might Not Get Interest-Rate Relief
Loans like the one described above are known as securitized loans, which means "the lender transfers title to the loans to a trust and sells shares in the trust to investors," Kantrowitz says. "The interest revenue is used to make payments to the investors. Since the loans are held by the trust, the terms of the loans cannot be modified unless the modification is specifically allowed by the terms of the trust. So, it is still a federal loan, with all the benefits and terms intact, but it is not owned by the U.S. Department of Education."
This is the more complicated explanation as to why your interest rate isn't 0%. But there's another twist: A guarantor is a company that reimburses the federal government for defaulted student loans. In this case, the guarantor is the Pennsylvania Higher Education Assistance Agency. PHEAA guaranteed more than $19 billion in loans as of June 30, 2022, according to its annual report.
The guarantor acts as an intermediary between the Department of Education and the lender, according to Kantrowitz. If you default, your lender files a claim with the guarantor. The guarantor pays the default claim, transfers the loan to the Department of Education, and the guarantor becomes the servicer.
"If a loan has a guarantor, it usually is an FFELP loan that is not held by the U.S. Department of Education, unless the loan is in default," Kantrowitz says. "So FFELP loans that are in default are one category of ED-held loans eligible for the payment pause and interest waiver."
Defaulting causes a bunch of administrative headaches and financial consequences, both long and short term, that you don't want to inflict on yourself. So instead of doing that, learn about your other options.
What if the Education Department Doesn't Own Your Loans?
Having private loans or federal loans that aren't owned by the Education Department doesn't mean you can't get relief if you've been affected by the pandemic.
Under a state-led initiative, residents of California, Colorado, Connecticut, Illinois, Massachusetts, New York, New Jersey, Vermont, Virginia, and Washington are eligible for relief on student loans not held by the Department of Education. In these 10 states, you can get payment relief if your loan servicer is one of these companies:
- Aspire Resources
- College Ave Student Loan Serviceing, LLC
- Earnest Operations
- Kentucky Higher Education Student Loan Corporation (KHESLC)
- Lendkey Technologies, Inc.
- SoFi Lending Corp.
- Tuition Options
- Utah Higher Education Assistance Authority (UHEAA)
- Vermont Student Assistance Corporation (VSAC)
Other companies may partner as well. This state-led payment relief is less generous than what's available through the CARES Act, but it's better than nothing. You can do one of the following:
- Request temporary forbearance for 90 days
- Get relief from late fees
- Get relief from negative credit reporting and debt collection activities, including wage garnishment
Check Your State's Website for Relief Options
Visit your state's website to see what relief lenders are providing where you live. Whether your state has come to an arrangement with commercial student lenders or not, you can still visit your loan servicer's website to see what options they're offering all borrowers, and you can also call or email your servicer to find out what specific options may be available to you given your circumstances.
You'll have to request assistance if you want it but only borrowers with Department of Education loans get automatic assistance. And in some cases, you might have to demonstrate that you've experienced economic hardship.
You should also know that there may be long-term consequences, such as paying more interest in the long run and pushing back the date when you'll be student-debt-free.
Besides the possibilities described above, you may also be able to request economic hardship or unemployment deferment. You may be able to switch to an income-based repayment plan. You may also be able to get a temporary reduction in your interest rate or a loan modification.
On Aug. 24, 2022, President Joe Biden’s administration proposed a new plan for federal student loan repayment that caps monthly payments for undergraduate loans at 5% of your discretionary income. After 10 years, whatever remaining balance you have would be eliminated if the original loan balance was $12,000 or less.
Another option, if you have federal loans that aren't owned by the Department of Education, is loan consolidation. It will get you the 0% CARES Act rate, but it will also cause you to lose any benefits provided by the lender, such as a lower interest rate. That means your post-consolidation rate, after the 0% period ends, could be higher, Kantrowitz says.
Loan consolidation will restart the clock on your qualifying payments if you're on an income-driven repayment plan.
The Bottom Line
Student loan debt relief has been one of the longest pandemic-relief measures, running into 2023, well past when the last stimulus checks were mailed and expanded unemployment expired. Plus, since the start of the pandemic, the Biden White House has proposed up to $20,000 in loan forgiveness for eligible borrowers and made that forgiveness tax-free through 2025—though that proposal still must win court challenges. Unfortunately, robust relief did little to reduce America's enormous student loan debt burden, which stood at $1.60 trillion in Q4 2022.