What The CARES Act Means For Your Student Loans

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Student loans can be a burden, and the current coronavirus pandemic is not making it any easier. With unemployment at record highs, Americans are struggling to pay for necessities such as rent or groceries.

Enter the CARES Act. It's the Coronavirus Aid, Relief, and Economic Security Act, which was passed by Congress and has supplied $2 trillion of relief. Part of the CARES Act includes automatic suspension of principal and interest payments on federally held student loans through Sept. 30, 2020.

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Of course, there is the fine print. Student loans come in all different shapes and sizes. How do you know for sure that you qualify for this type of relief? What about private loans? Life Kit and WNYC Studios' Death, Sex & Money teamed up to bring you answers. Anna Sale, host of Death, Sex & Money, sat down with Betsy Mayotte, who runs the Institute of Student Loan Advisors, to get the answers to common questions about student loan relief during the pandemic.

Q: How do I know if I qualify for relief under the CARES Act?

A: Check what kind of loans you have. People with federally held federal loans are eligible for CARES Act relief.

First, the good news. Most federal student loan borrowers don't have to do anything to qualify for CARES Act relief.

Mayotte says that those borrowers who qualify will receive a waiver of their payments through Sept. 30, 2020, and 0% interest and that "they don't have to do a darn thing to get those benefits."

But how do you know if you qualify? That's where it gets complicated, says Mayotte. You need to confirm that you have federally held federal loans. Federal loans that don't qualify for CARES Act relief are under the Federal Family Education Loan Program. Even though those loans are a part of a federal program, some of them are held by commercial banks, not the federal government. Those include PLUS loans and Stafford loans. Perkins loans held by an institution or school are also not eligible. Confusing.

The best way to confirm? Mayotte says, "Ask your servicer if you have a federally held federal loan, or ... log on to studentaid.gov and look at the loan detail and see if it lists the Department of Education as the lender."

Q: Does the CARES Act really let me skip my payments if I'm enlisted in Public Service Loan Forgiveness?

A: If you're enrolled in Public Service Loan Forgiveness and continue to work full time for a qualified employer, take advantage of the CARES Act and do not make payments, at least until after Sept. 30.

"I have so many borrowers that are just so anxious about it they say, 'Well, I'm going to pay anyway,' " says Mayotte. "Don't pay."

If you want to double-check that you qualify for this PSLF waiver under the CARES Act, visit StudentAid.gov and click on where it says, "Coronavirus and Forbearance Information for Students, Borrowers, and Parents."

Mayotte suggests putting the money that would have gone to your loan into building up an emergency fund.

Q: What if I have private loans that don't qualify for CARES Act relief? What can I do?

A: If you have private student loans or otherwise don't qualify for CARES Act relief, reach out to your servicer.

"Private loans, unfortunately, there's no sort of blanket guidance other than to call your loan holder if you're financially struggling and see what they're offering," says Mayotte.

Many private lenders are offering some automatic relief, while others are offering their typical option of forbearance, which allows borrowers to postpone payments, but interest usually continues to accrue. That means forbearance can end up costing a borrower more in the long run.

One option to consider instead of forbearance is an income-driven repayment plan. That will help lower your monthly payment, sometimes to as low as $0.

There are other options, says Mayotte. "There's unemployment deferment. There's economic hardship deferment."

Q: I'm about to default on my payments. What's a good strategy?

A: If your federal loans are in default, look into entering a loan rehabilitation program.

Loan rehabilitation helps borrowers who've defaulted on their student loans get back on track. To qualify, you typically need to make nine consecutive on-time payments. But under the CARES Act, Mayotte notes, borrowers do not need to make those payments and those unmade payments will still count as on-time payments.

"I have never seen them do anything like this before," Mayotte says. "This is a gift to those borrowers in that situation."

If you're not already a part of loan rehabilitation, Mayotte says to call your lender to sign up.

Bonus tip: Watch out for scammers.

Scammers always come crawling out of the gutters during times of crisis. Mayotte says to look out for a few key tells from any phone call or email you receive about loans.

"Anybody that tries to create a sense of urgency, like, 'You have to do X, or you're not going to get the waiver,' or 'You have to pay this fee' ... that is almost certainly a scam," she says.

"Anybody who runs across any of those, please, please, please take a minute and report them to the Federal Trade Commission, as well as your local attorney general's office."

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