With potentially millions of Americans facing unemployment, people with student loans worry they will default if they cannot make payments. Fortunately, the Department of Education (ED) announced that the office of Federal Student Aid will provide student loan relief to borrowers during the national coronavirus emergency.
Interest rates on federally held student loans will automatically drop to zero percent for at least 60 days, and each borrower will have the option to suspend payments for at least two months (the suspension is not automatic). This includes Direct Loans, Federal Perkins Loans, and Federal Family Education Loan Program loans held by ED. Loans held by commercial lenders are not eligible.
The adjustment is effective as of March 13, 2020. If a borrower continues to make payments, the full amount of each payment will be applied to the loan principal – an excellent opportunity to pay down a loan balance if funds are available. Borrowers interested in Public Service Loan Forgiveness may wish to consider making payments if possible. If a loan accrued interested before March 13, any payments will be applied to pay off outstanding interest first.
To give people a safety net, the agency has also authorized an automatic suspension of payments if a borrower is more than 31 days delinquent as of March 13, 2020, or who becomes more than 31 days delinquent after that date.
Borrowers whose income has decreased should contact their loan servicers to discuss a possible reduction in their monthly payments. Loan servicers may be reached at 800-4-FED-AID or the Federal Student Aid website. Visit StudentAid.gov/coronavirus for further information about the student loan relief plans.