The Coronavirus Aid, Relief and Economic Security Act, also known as the CARES Act, is an economic stimulus bill passed by the federal government on March 27, 2020. The bill provides many benefits directly to the American public, and specifically includes relief for Americans struggling with student loan debt.
Below is a summary of the benefits of the Act and subsequent administrative action toward student loans:
- The CARES Act suspends interest and payments on all student loans until (recently extended) September 30, 2021;
- Suspended payments will count toward loan forgiveness programs such as Public Service Loan Forgiveness (PSLF), and will count toward loan rehabilitation;
- Suspended payments will be reported as regularly scheduled payments to consumer reporting agencies;
- Suspends collection efforts on defaulted loans, including wage garnishment, reduction of tax refund, and Social Security garnishment;
- Waives consecutive years requirement for Teacher Loan Forgiveness if there is temporary interruption due to qualifying emergency;
- Creates new tax benefits for employers to provide student loan payments for an employee. The COVID relief and government funding law passed and signed into law in December of 2020 extended this benefit through the end of 2025, allowing employers to contribute up to $5,250 annually toward student loans tax-free.
- Requires the Secretary of Education to inform borrowers of the policy changes no later than 15 days after enactment, and beginning on August 1, 2020 requires the Secretary to provide no less than 6 notices of when payment suspension concludes and options to enroll in income-driven repayment plans.
Additionally, here are some important facts to remember:
- Enrollment in CARES Act benefits is automatic and you DO NOT need to opt-in.
- Not all federal student loans qualify for automatic loan suspension.
- Private student loans are not eligible for CARES Act benefits.
- The CARES Act benefits are for a temporary period through (recently extended) September 30, 2021.
- Continuing to pay on your student loans during this period can put you ahead. (...unless you are enrolled in PSLF, in which case a special loophole makes it such that not paying may be more beneficial. Keep reading for more details.)
- Since this law is very new, there is little guidance as to how these changes will be implemented. However, we will continue to track updates from the federal government.
- There are requirements regarding communication from your Providers about these changes. More information can be found in THIS ARTICLE
**For Full Department of Education guidance regarding the CARES Act, CLICK HERE.