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What You Need to Know About COVID-19 and Student Loan Forgiveness

COVID-19 and Student Loan Forgiveness

The far-reaching effects of COVID-19 have continued to make unnecessarily complicated processes even more complicated, which is evidenced by what we’re seeing with student loan forgiveness programs under the $2 trillion coronavirus relief package.

How the CARES Act is Impacting Student Loan Forgiveness

Currently there are two major student loan forgiveness plans – the income-driven repayment plan and public service loan forgiveness. Both of these federal student loan plans qualify for additional benefits  through September 30, 2020 as part of the CARES Act.

Under the Act, federal student loan payments have been put on hold and interest rates have been set to 0 percent. Additionally, collections on defaulted federal student loans have also stopped. Important to note, however, is that not all federal student loans qualify – only those owned by the U.S. Department of Education do.

Here are some important things to keep in mind regarding student loan forgiveness during this period of relief under the CARES Act:

  • Any non-payment of federal student loans during this period will still count toward your student loan forgiveness payment requirements.
  • Full-time employment requirements must still be fulfilled. For example, public service loan forgiveness requires you to be employed full-time and work at least 30 hours per week, but even if you lose your job due to COVID-19 circumstances, you can still pause your loan payments through September 30, 2020. The unfortunate news is that non-payment during this time of unemployment may not count towards your required number of 120 total monthly payments, however, keep in mind that those monthly payments do not need to be consecutive.
  • If you have an income-driven payment plan and lose your job or take a pay-cut due to COVID-19, you can re-certify your income to recalculate your monthly payments. Any new monthly payment would become effective after September 30 since payments are currently paused. Moreover, because income-driven repayment plans don’t require you to be employed, non-payments during this period of March-September 2020 should still count as “credit” toward your 20 or 25 years of payments.

Also of note if you are still a student: if you take more than 6 months off for a ‘gap year’ so you don’t miss out too much on the college experience due to COVID, you’ll likely have to start paying back your loans.

The cost of higher education in the United States is staggering and being saddled with student debt can make an already challenging time even more difficult. If you find yourself managing student loan debt and not sure which path to take forward, get in touch with us at Jacobs Legal.


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