Updated March 1, 2021
With the extension of certain federal loan repayment measures through September 30, 2021, many borrowers may be wondering what this means for their loans, and if they should continue making payments if they are able. Full details are available at https://studentaid.gov/announcements-events/coronavirus, but below we have shared some of the commonly asked questions.
What measures were instituted, and when?
On March 20, 2020, the Secretary of Education directed the office of Federal Student Aid to provide the following relief on ED-held federal student loans:
- suspend loan payments
- stop collections on defaulted loans
- set interest rates to 0% for a period of 60 days
On March 27, 2020, Congress passed, and the president signed into law, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which provides for the above relief measures through Sept. 30, 2020.
On Aug. 8, 2020, President Trump directed the Secretary to continue to suspend loan payments, stop collections, and waive interest on ED-held student loans until Dec. 31, 2020.
On December 4, 2020, these measures were extended through January 31, 2021.
On Jan. 20, 2021, the emergency relief measures were extended through September 30, 2021.
To which loans does the 0% rate apply?
From March 13, 2020, through Sept. 30, 2021, the interest rate is 0% on the following types of federal student loans, but only if they are loans owned by ED:
- Defaulted and nondefaulted Direct Loans
- Defaulted and nondefaulted FFEL Program loans
- Defaulted and nondefaulted Federal Perkins Loans
- Defaulted HEAL loans (Please note that some FFEL Program and HEAL loans are owned by commercial lenders, and some Perkins Loans are owned by the institution you attended. These loans are not eligible for this benefit at this time, but you can contact your servicer to ask about what benefits may be available.)
Private student loans are NOT included, but you may have options for temporary forbearance or other accommodations if you are experiencing financial hardship. Contact your lender directly if you are having difficulty making your private student loan payments.
Should I continue to make payments on my federal loans?
This is an individual decision, and there are many factors to consider. The measures outlined above were enacted to provide relief during a time when many Americans have faced uncertainty in their income and employment status. If you are able to make payments during this time, it may be wise to do so.
Continuing to make payments could help you pay down your loan balance more quickly because the full amount of a payment will be applied to principal once all interest accrued prior to September 30, 2021, is paid.
I was considering refinancing my student loans before these measures were enacted – should I still consider it?
Every situation is different. If you have previously refinanced private and/or federal student loans with a private lender, refinancing at current low interest rates could shorten your repayment term and/or reduce the amount of interest you pay over time.
Additionally, you could elect to refinance only your private student loans in order to keep the federal student loan benefits while also taking advantage of low interest rates.
However, we highly recommend that you carefully consider all of your options before refinancing your federal student loans. Please remember that when you refinance federal student loans into a private student loan, you waive any current and potential future federal student loan benefits. Make sure to explore all available resources, including information on the Department of Education’s website at www.studentaid.gov/coronavirus to understand how these proposals may impact you, so that you can determine if losing current and potential federal student loan benefits outweigh the benefits of refinancing your loans.
Need personalized guidance? Our College Counselor is available to answer any questions you may have – send an email or schedule an appointment for a time that’s convenient for you.