The COVID-19 pandemic has created financial stress on our entire population.  The CARES Act signed by the President on March 27, 2020 provides financial relief for several sectors of society.  Section 4513 of the Act, entitled Temporary Relief for Federal Student Loan Borrowers, provides broad financial relief for those persons who are currently burdened with federal student loans.  The Act accomplishes this by automatically placing their student loans in an administrative forbearance from March 13, 2020 through September 30, 2020.  During this forbearance period, borrowers are not required to make their monthly loan payments and will not incur a penalty nor accrue additional interest on the loan for not making the payment.  To accomplish this, the CARES Act sets the student loan interest rate on federal student loans at 0% during the period of forbearance.

The 0% interest rate applies to the following types of student loans owned by the U.S. Department of Education (“ED”):  Direct Loans, Federal Family Education Loan (“FFEL”) Program Loans, and Federal Perkins Loans.  It is important to note, however, that the 0% interest rate only applies if the loan is owned by the federal government.  Some FFEL Program loans are owned by commercial lenders and some Perkins loans are owned by the educational institution attended by the borrower. Those loans are not covered. In addition, private loans are also not eligible for the 0% rate provided by the Act. Although these loans are not covered by the Act several lenders are nevertheless providing their borrowers with some type of financial relief.

For those borrowers with Direct loans owned by the federal government who are working toward Public Service Loan Forgiveness (PSLF) the suspended payments will continue to count as if the payment had been made toward the loan forgiveness program so that borrowers are not penalized as a result of the suspension.

Many borrowers utilize an auto-debit payment system to make their monthly federal loan payments.  The automatic payments are suspended during the forbearance period.  If a payment had been made during the forbearance period, the borrower can obtain a refund from his loan servicer if he chooses to do so.  Borrowers who are in a positon to make their loan payments during the forbearance period may continue to do so in which case the entire payment will be applied against the loan principle once all interest that accrued prior to March 13, 2020 is paid.

For borrowers who are in default of their federal student loans, the ED has temporarily stopped collection efforts including the garnishment of wages. In addition, borrowers who have had their tax refund or Social Security payment withheld to repay a defaulted loan obligation may recover back the money that was withheld if the repayment of the defaulted loan was in the process of being withheld during the forbearance period.  ED has set up a Default Resolution Group to resolve these issues.  It can be contacted at 1,800. 621.3115.

Additional information can be found on the U.S. Department of Education website at