Special Coronavirus Bulletin #3: Payment Suspensions and Interest Waivers on Your Federal Student Loans

If you have federal student loans, you should know that federal policy makers are moving fast to extend debt relief to you during the current coronavirus national emergency.

Federal Student Loan Payments Suspended:

  • Today, the U.S. Education Department (ED) announced that you’re allowed to obtain an “administrative forbearance” suspending your FDLP debt payments. This forbearance took effect last Friday, March 13. It’ll last at least 60 days. To get it, you must request it from your FDLP loan servicer, either by phone or online.
  • Are you pursuing Public Service Loan Forgiveness (PSLF)? Think carefully before requesting this administrative forbearance. Any month in which you make no payment doesn’t count toward the 120 “qualifying months” you need for PSLF.
  • ED’s announcement also disclosed that you’ll get a forbearance suspending any of your payments that were more than 31 days late as of March 13, or that become more than 31 days late after March 13. You need not contact anyone to get this forbearance. Your loan servicer will automatically apply it to your loans.

Interest Waiver on Certain Federal Student Loans:

  • The President recently announced that interest on all student loans held by the government is waived until further notice. Today, ED issued guidance on it’s Federal Student Aid (FSA) office’s coronavirus website confirming this waiver’s effective date as March 13. It’ll be given automatically so you needn’t apply for it.

Student Loans Held By The Government:

  • These include all FDLP Loans, but usually not Federal Family Education Loan Program (FFELP) Loans, normally held by commercial lenders, or Federal Perkins Loans, normally held by postsecondary schools. So this interest waiver is off the table for them.
  • However, under certain circumstances, the holding of such loans may have been transferred to ED, in which case they’ll get this interest waiver.
  • Ask your loan servicer if you’re unsure about who holds your federal student loans. If your FFELP or Perkins Loans are held by lenders and schools, ask your loan servicer about consolidating them into the FDLP to get their interest waived.
  • The government never holds private student loans, so their interest won’t be waived unless their holders do interest waivers.

Interest Waiver Impact:

  • Normally, during a forbearance, you’re not required to make payments on loans held by the government, but interest keeps accumulating on them. At forbearance-end, unpaid interest gets added to your loan principal, and thereafter interest accumulates on your enlarged loan principal.
  • However, because of the interest waiver, there’ll be no post-March 12 interest to capitalize if you get a forbearance. Also, if you choose to make a payment while in a forbearance, 100% of it’ll get used to shrink your loan principal.

More guidance is coming. We’ll issue additional “special coronavirus bulletins” as it does. So keep checking this website, or FSA’s coronavirus website, for additional news. Meanwhile, stay healthy!

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