Federal Student Loans and COVID-19: What You Need To Know

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The ongoing financial impact of the COVID-19 pandemic has left many people scrambling to handle their monthly bills — including federal student loan payments. However, the good news is that federal student loan payments and interest have been paused by the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020.

Also keep in mind that current college students can still take out federal student loans to pay for school and might even be eligible for more aid depending on their financial situation.

• The effects of the COVID-19 pandemic on federal student loans
• Interest capitalization and the CARES Act
• Eligible student loans
• Manage your existing student loans
• Prepare for the CARES Act expiration
• Private student loans and the CARES Act

How has the COVID-19 pandemic affected federal student loans?

The coronavirus impacted federal student loan repayment for current borrowers and may have an impact on new borrowers, as well. If you already have federal student loans in repayment or are looking to take out federal student loans for school, here are some changes to be aware of:

For federal student loans in repayment

The CARES Act of 2020 offered immediate relief and assistance to Americans who were financially impacted by the COVID-19 pandemic. An important provision of the CARES Act granted automatic forbearance to all federal student loan borrowers whose loans are owned by the U.S. Department of Education.

Since this forbearance is automatic, eligible borrowers don’t need to do anything to apply for these benefits — servicers of federal student loans have automatically placed qualifying loans in administrative forbearance.

The forbearance period has been extended multiple times and is currently set to expire on September 1, 2023. That means payments and interest on federal student loans have been suspended until then.

Here’s what this forbearance period specifically means for borrowers:

• Payments are not required until the forbearance period ends. The automatic forbearance is scheduled to end on September 1, 2023.
• There are no late fees during the forbearance period.
• The interest rate is set at 0%. Your loans will not accrue interest during the payment pause.
• Borrowers may make partial or full payments during the pause period. These payments will be applied directly to the principal (after paying down any interest accrued prior to March 13, 2020). That means any payments made during this forbearance period can help pay down your loans more quickly.
• Refunds are available for any payments made during the forbearance period. If you need to access money you paid to your federal student loan servicer after March 13, 2020, you can request a refund. This is true for both automatic payments and manual payments.
• Forbearance is automatic for eligible loans. You do not have to request these benefits if you are a borrower with an eligible loan.

If you want to continue making payments as usual, you’ll need to opt out of forbearance. To do so, contact your servicer. They can also help if you have financial hardship and need help with student loan repayment.

While having your student loans in forbearance can take pressure off of your finances, keep in mind that it will also extend your repayment date.

You can use the student loan calculator below to determine how long it’ll take to pay off your loan. You can use the slider to see how increasing your payments can change the payoff date.

Check Out: Federal Direct PLUS Student Loans: What to Know Before Borrowing

For new federal student loans

If you’re in school or starting college during the 2023-24 academic year, the process to apply for federal student loans has remained the same:

1. Complete the FAFSA. You’ll provide your personal and financial information when you submit the Free Application for Federal Student Aid (FAFSA). If you’re a dependent student, you’ll generally also need to include information from your parents.
2. Accept your financial aid. After your school has reviewed your FAFSA information, you’ll receive a financial aid award letter detailing what federal student loans and other financial aid you’re eligible for. You can then decide which aid you’d like to accept.

Learn More:

• Gap Years and COVID-19: What You Need to Know About Student Loans
• Federal vs. Private Student Loans: 5 Differences

How does the CARES Act affect interest capitalization?

If you were up to date on your loan payments before the CARES Act took effect, then the interest you accrued prior to March 13, 2020, won’t capitalize during the suspension period.

However, you might still have interest capitalize if:

• Your loans were in a type of deferment or forbearance where interest would have normally capitalized before the suspension
• Your loans were in a grace period before the suspension began

You can check with your servicer to see if any interest will capitalize on your loans once this emergency relief period ends.

What student loans are eligible for the CARES Act?

To qualify, the loans must be owned by the Department of Education, not a commercial lender as might be the case for certain types of loans. Loans eligible include:

• Defaulted and non-defaulted Direct Loans
• Defaulted and non-defaulted Federal Family Education Loan (FFEL) Program loans
• Defaulted FFEL Program loans managed by guaranty agencies
• Defaulted and non-defaulted Federal Perkins Loans
• Defaulted Health Education Assistance Loan Program loans

Learn More: Can You Pay Your Student Loans With a Credit Card?

How to manage existing student loans

If you have federal student loans in repayment, you don’t need to worry about filing anything to have your payments and interest suspended — your servicer will automatically apply these benefits to your loans.

However, in addition to the suspension, there are also other federal repayment options that might help you reduce or postpone your payments, including:

• Deferment: This allows you to temporarily postpone your loan payments. There are several situations that might qualify you for student loan deferment, such as financial hardship, unemployment, returning to school, undergoing cancer treatment, and more. Keep in mind that interest might continue to accrue in a deferment period, depending on the type of loan you have.
• Forbearance: This is another way to pause your payments for a short time. Unlike loans in deferment, loans will always continue to accrue interest while in forbearance. There are a few circumstances that might make you eligible for federal forbearance, including financial hardship, medical expenses, or changes to your employment. Servicers can also grant forbearances on a case-by-case basis.
• Income-driven repayment: Under an income-driven repayment (IDR) plan, your payment is based on your discretionary income. There are four IDR plans to choose from: Pay As You Earn, Revised Pay As You Earn, Income-Based Repayment, and Income-Contingent Repayment. Keep in mind that, depending on the plan, you could have any remaining balance forgiven after 20 to 25 years of on-time payments.
• Graduated repayment plan: Under a graduated plan, your payments start low and increase every two years. This could be helpful if you expect your income to increase in the future.
• Extended repayment plan: If you sign up for an extended repayment plan, you could have up to 25 years to repay your loans, which will likely give you a lower payment. Just keep in mind that choosing a longer repayment term means you’ll pay more in interest over time.
• Federal consolidation: If you consolidate your federal student loans through a Direct Consolidation Loan, you can extend your repayment term up to 30 years. Unlike private student loan consolidation, federal consolidation doesn’t require a credit check. If you’re considering private vs. federal consolidation, keep in mind that while you’ll likely get a reduced monthly payment through federal consolidation, you won’t get a lower interest rate. However, you’ll still have access to all of your federal benefits and protections.

How to prepare for the CARES Act expiration

With the end of the CARES Act student loan payment pause imminent, there are several things you can do to be ready for when payments resume. Here’s what you should do to prepare:

• Know when payments will resume. The payment pause will end on September 1, 2023, but exactly when your first payment is due will depend on your loan servicer.
• Update your contact information with your loan servicer. You are responsible for your student loan payments even if your loan servicer is unable to get in touch with you. Make sure your contact information is up-to-date so you do not accidentally miss payments or default.
• Review your payment options. If you were enrolled in automatic payments, check to make sure the enrollment information is still correct. Check that your bank account information is correct and you are still able to make payments to your loan servicer.
• Check your repayment and consolidation options. You may want to shift your repayment plan to one that better fits your current financial situation, or you may be interested in consolidating your loans with a Federal Direct Consolidation Loan or with a private loan refinance.

Check out: Student Loan Refinance: Compare 10 Best Lenders Risk-Free

Private student loans and the CARES Act

Unfortunately, private student loans don’t qualify for CARES Act benefits. But you do have other options.

To start, if you are a resident of California, Colorado, Connecticut, Illinois, Massachusetts, New York, New Jersey, Vermont, Virginia, Washington, or the District of Columbia, you may be eligible for expanded relief. Relief options are available to residents of those states who have loans serviced by the following lenders:

• Aspire Resources, Inc.
• College Ave Student Loan Servicing, LLC
• Earnest Operations
• Edfinancial
• Kentucky Higher Education Student Loan Corporation
• Lendkey Technologies, Inc.
• MOHELA
• Navient
• Nelnet
• SoFi Lending Corp.
• Tuition Options
• Upstart Network, Inc.
• Vermont Student Assistance Corporation

If you are eligible for expanded relief from one of these loan servicers, your relief options may include:

• A minimum of 90 days of forbearance
• Late payment fees waived for at least 90 days while the loan is on forbearance
• Not reporting missed payments to credit reporting agencies for at least 90 days
• Refraining from sending loans to debt collectors for at least 90 days
• Helping to enroll borrowers in borrower assistance programs, like income-based repayment.

Borrowers who do not qualify for either federal student loan relief or these statewide options may consider refinancing their student loans. Refinancing your private student loans, may allow you to:

• Get a lower interest rate, which could save you money on interest and potentially help you pay off your loans faster
• Opt for a longer repayment period, which could reduce your monthly payment and lessen the strain on your budget

To qualify for refinancing, you’ll typically need good credit and verifiable income. While you might be able to refinance student loans with bad credit through certain lenders, you’ll likely end up with a higher interest rate compared to the rates offered to borrowers with good credit.

If you’re struggling to get approved for refinancing, consider applying with a cosigner. Even if you don’t need a cosigner to qualify, having one might get you a better rate than you’d get on your own.

If you decide to refinance your student loans, be sure to consider as many lenders as possible to find the right loan for you.

Lender	Variable rates from (APR)	Fixed rates from (APR)
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	5.33%+	4.9%+
Fixed APR: 4.9%+ Variable APR: 5.33%+ Min. credit score: 720 Loan amount: $10,000 to $400,000 Loan terms (years): 5, 7, 10, 15, 20 Repayment options: Military deferment, forbearance Fees: Late fee Discounts: Autopay Eligibility: Must have a credit score of at least 720, a minimum income of $60,000, and must be a resident of Texas Customer service: Email, phone Soft credit check: 720 Cosigner release: No Loan servicer: Firstmark Services Max. Undergraduate Loan Balance: $100,000 - $149,000 Max. Graduate Loan Balance: $200,000 - $400,000 Offers Parent PLUS Refinancing: Does not disclose
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	7.29%+1	7.0%+1
Fixed APR: 7.0%+1 Variable APR: 7.29%+1 Min. credit score: Does not disclose Loan amount: $10,000 to $750,000 Loan terms (years): 5, 7, 10, 15, 20 Repayment options: Immediate repayment, academic deferment, military deferment, forbearance, loans discharged upon death or disability Fees: Late fee Discounts: Autopay, loyalty Eligibility: Must be a U.S. citizen or permanent resident and have at least $10,000 in student loans Customer service: Email, phone, chat Soft credit check: Yes Cosigner release: After 24 to 36 months Loan servicer: Firstmark Services Max. Undergraduate Loan Balance: $100,000 to $149,000 Max. Graduate Loan Balance: Less than $150,000 Offers Parent PLUS Refinancing: Yes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	6.99%+2	6.99%+2
Fixed APR: 6.99%+2 Variable APR: 6.99%+2 Min. credit score: Does not disclose Loan amount: $5,000 to $300,000 Loan terms (years): 5, 7, 10, 12, 15 Repayment options: Military deferment, forbearance, loans discharged upon death or disability Fees: Late fee Discounts: Autopay Eligibility: All states except for ME Customer service: Email, phone, chat Soft credit check: Yes Cosigner release: After 24 to 36 months Loan servicer: College Ave Servicing LLC Max. Undergraduate Loan Balance: $100,000 to $149,000 Max. Graduate Loan Balance: Less than $300,000 Offers Parent PLUS Refinancing: Yes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	8.05%+5	6.0%+5
Fixed APR: 6.0%+5 Variable APR: 8.05%+5 Min. credit score: 700 Loan amount: $7,500 to $200,000 Loan terms (years): 5, 10, 15, 20 Repayment options: Immediate repayment, academic deferment, forbearance, loans discharged upon death or disability Fees: None Discounts: Autopay Eligibility: Must be a U.S. citizen or permanent resident and submit two personal references Customer service: Email, phone Soft credit check: Yes Cosigner release: After 24 months Loan servicer: Firstmark Services Max. Undergraduate Loan Balance: $150,000 to $249,000 Max. Graduate Loan Balance: $150,000 to $199,000 Offers Parent PLUS Refinancing : Yes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	5.28%+3	5.48%+3
Fixed APR: 5.48%+3 Variable APR: 5.28%+3 Min. credit score: 680 Loan amount: $10,000 to $250,000 Loan terms (years): 5, 7, 10, 15, 20 Repayment options: Forbearance Fees: None Discounts: None Eligibility: Must be a U.S. citizen or permanent resident, have at least $15,000 in student loan debt, and have a bachelor’s degree or higher from an approved school Customer service: Email, phone Soft credit check: Yes Cosigner release: No Loan servicer: Mohela Max. Undergraduate Loan Balance: $250,000 Max. Graduate Loan Balance: $250,000 Offers Parent PLUS Refinancing: Yes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	8.4%+4	5.9%+4
Fixed APR: 5.9%+4 Variable APR: 8.4%+4 Min. credit score: 670 Loan amount: $5,000 to $250,000 Loan terms (years): 5, 10, 15, 20 Repayment options: Academic deferment, military deferment, forbearance Fees: Late fee, returned payment fee Discounts: Autopay Eligibility: Must be U.S. citizen or permanent resident Customer service: Email, phone, chat Soft credit check: Yes Cosigner release: Yes Max undergraduate loan balance: $250,000 Max graduate loan balance: $250,000 Offers Parent PLUS refinancing: Yes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	5.52%+	5.24%+
Fixed APR: 5.24%+ Variable APR: 5.52%+ Min. credit score: 700 Loan amount: $5,000 to $300,000 Loan terms (years): 5, 7, 10, 15 Max. undergraduate Loan Balance: $125,000 Time to Fund: 10 to 30 days Repayment options: Immediate repayment, forbearance Fees: Late fee Discounts: Autopay Eligibility: Must be a U.S. citizen or permanent resident and have already graduated with at least an associate degree from an eligible institution Customer service: Email, phone Soft credit check: Yes Cosigner release: After 12 months Loan servicer: LendKey Technologies Inc. Max. graduate Loan Balance: $175,000 Credible Review: LendKey Student Loans review Offers Parent PLUS Refinancing: No
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	N/A	6.2%+
Fixed APR: 6.2%+ Variable APR: N/A Min. credit score: 670 Loan amount: $10,000 up to the total amount Loan terms (years): 7, 10, 15 Repayment options: Military deferment, loans discharged upon death or disability Fees: None Discounts: None Eligibility: Must be a U.S. citizen or permanent resident and have at least $10,000 in student loans Customer service: Email, phone Soft credit check: Yes Cosigner release: No Loan servicer: AES Max. Undergraduate Loan Balance: No maximum Max. Gradaute Loan Balance: No maximum Offers Parent PLUS Refinancing: Yes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	7.12%+ - 11.19%+8	7.610%+ - 14.510%+8
Fixed APR: 7.12%+ - 11.19%+8 Variable APR: 7.610%+ - 14.510%+8 Min. credit score: Mid-to-high 600's FICO8 Loan amount: $5,000 to $500,000 (depending on degree) Loan terms (years): 5, 7, 10, 15, 20, 25 years8 Time to fund: 3 business days Repayment options: Immediate Fees: Late fee, NSF fee Discounts: Autopay8 Eligibility: Must be a U.S. citizen or have permanent residency status with a valid U.S. Social Security number Customer service: Email, phone Soft credit check: Yes8 Cosigner release: After 24 months8 Loan servicer: Firstmark Services Max. undergraduate loan balance: $125,000 Max. graduate loan balance: $500,000 Offers Parent PLUS loans: Yes Min. income: You or your cosigner must meet Nelnet Bank's income criteria
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	N/A	5.79%+
Fixed APR: 5.79%+ Variable APR: N/A Min. credit score: 680 Loan amount: $7,500 to $250,000 Loan terms (years): 5, 10, 15 Repayment options: Academic deferment, military deferment, forbearance, loans discharged upon death or disability Fees: None Discounts: Autopay Eligibility: Available in all 50 states; must also have at least $7,500 in student loans and a minimum income of $40,000 Customer service: Email, phone Soft credit check: Does not disclose Cosigner release: No Loan servicer: Rhode Island Student Loan Authority Max. Undergraduate Loan Balance: $150,000 - $249,000 Max. Graduate Loan Balance: $200,000 - $249,000 Offers Parent PLUS Refinancing: Yes
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All APRs reflect autopay and loyalty discounts where available | 1Citizens Disclosures | 2College Ave Disclosures | 5EDvestinU Disclosures | 3 ELFI Disclosures | 4INvestEd Disclosures | 7ISL Education Lending Disclosures  | 8Nelnet Bank Disclosures

About the author

Emily Guy Birken

Emily Guy Birken is a Credible authority on student loans and personal finance. Her work has been featured by Forbes, Kiplinger’s, Huffington Post, MSN Money, and The Washington Post online.

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