4 Options if Your Student Loans are Ineligible for the CARES Act ProtectionsApril 22, 2020
If you’re like a lot of recent graduates, you’re living paycheck to paycheck. And chances are, your monthly student loan payments eat up a significant portion of your income. According to the Federal Reserve, the average student loan payment is $393 per month. Any disruption to your paycheck can leave you scrambling to make ends meet, and you could be at risk of defaulting on your loans.
The COVID-19 pandemic has caused many people to lose their jobs or a substantial part of their earnings. If that’s the case for you and you can’t keep up with your student loan payments, the CARES Act could help. However, not all loans are eligible for the CARES Act protections. If you have a student loan that doesn’t qualify for the benefits outlined by the CARES Act, here’s what you can do to manage your debt.
What is the CARES Act?
President Donald Trump signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act into law on March 27 and it went into effect immediately. As part of its efforts to bolster the economy, the CARES Act introduced new changes for some student loan borrowers.
From March 13, 2020, until September 30, 2020, the government will completely suspend federal student loan payments, meaning you won’t have to make any payments until October. The payment suspension is automatic, so there’s no need to do anything at all; your loan servicer will adjust your account for you.
In addition, the interest rate on eligible student loans is reduced to 0% until September 30, 2020. During that time, no new interest will accrue on your loans.
Not all student loans qualify for the CARES Act’s protections. You qualify for the payment suspension and interest rate reduction if you have one of the following loan types:
- Direct Subsidized or Unsubsidized Loans
- Direct PLUS Loans, including Parent PLUS Loans and Grad PLUS Loans
- Direct Consolidation Loans
- Some FFEL program loans
- Some Perkins loans
However, not all FFEL and Perkins loans are eligible. Only FFEL and Perkins Loans issued by the federal government qualify for the CARES Act’s benefits. If your FFEL or Perkins Loan is owned by a commercial lender or your school, you can’t take advantage of these perks.
If you have private student loans, they don’t fall under the CARES Act at all, and your payments and interest rate will remain the same. Your regularly scheduled payments are still due each month, unless you can make an alternative arrangement with your lender.
4 other options if your loans aren’t eligible for CARES Act
If you have private student loans, FFEL program loans, or Perkins Loans that are ineligible for the CARES Act’s benefits, there are other ways to manage your debt if your income has been affected by the coronavirus pandemic.
1. Apply for administrative forbearance
If you have FFEL Program Loans or Perkins Loans, you may be eligible for an administrative forbearance. With this approach, you can temporarily postpone your payments without becoming delinquent or entering default.
During the forbearance, unpaid interest will capitalize on FFEL program loans, but unpaid interest is never capitalized on Perkins Loans.
Depending on your situation, you could postpone your payments for up to 12 months at a time.
To request a forbearance, contact your loan servicer directly.
2. Consolidate with a Direct Consolidation Loan
Some FFEL Program Loans and Perkins Loans aren’t eligible for the CARES Act benefits, but there is a loophole: you can consolidate your loans with a federal Direct Consolidation Loan. When you do so, your loans will fall under the Direct Loan program and will then be eligible for the CARES Act payment suspension and interest rate reduction.
When the CARES Act’s payment suspension is over, the Direct Consolidation Loan can still be beneficial. With a Direct Consolidation Loan, you can extend your repayment term to 30 years. And, you can apply for an income-driven repayment plan, reducing your monthly payment. It can be a useful alternative if you need long-term financial relief.
You can apply for a Direct Consolidation Loan online.
3. Consider student loan refinancing
If you have private loans or a mix of federal or private loans, another option is student loan refinancing, where you take out a loan for the amount of your existing debt. The new loan will have different terms, including the interest rate and loan length.
If you can’t afford your current payments, you can choose a longer loan term when you refinance. With a longer term, you may be able to get a much smaller monthly payment.
To get a rate quote and find out how student loan refinancing would affect your payments, use ELFI’s “Find My Rate” tool.* You can get an interest rate estimate and view loan terms without affecting your credit score.
4. Contact your lender
If you have private student loans, make sure you contact your lender as soon as possible if you’re having financial issues. Some lenders offer forbearance and hardship policies to help borrowers get back on their feet.
If you need help with your Education Loan Finance student loans, contact the customer care center by calling 1-844-601-ELFI.
Managing your loans while going through financial difficulties
The coronavirus outbreak has had a major impact on the entire globe, as well as the economy. If you’ve lost your job or had your income cut, there are different ways to get some relief from your student loan payments. If you’re not sure where to start, contact your lender right away and ask what kind of repayment options are available.
*Subject to credit approval. Terms and conditions apply.
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