You’ve probably seen a lot of news about the impact of COVID-19 on your student loans. We’re here to help explain the new changes and let you know how they might impact LRAP and PSLF.
Interested in learning more? View a recording of our webinar, originally held on April 15: Know Your Rights: COVID-19 and Student Loans (webinar) (recorded Zoom meeting & Google Slides available). Additionally, check out Berkeley Law’s Center for Consumer Law & Economic Justice’s Student Loans & COVID-19 consumer guide and FAQs and the East Bay Community Law Center’s PSLF and CARES Act infographic.
- Suspended loan payments
- Stimulus check
- 0% interest rate
- Adjusting your income-driven repayment plan
- Private student loans
- Institutional loans
- Halted collections
- LRAP payments
1. Suspended loan payments
On March 27, 2020, Congress passed a COVID-19 relief package called the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The CARES Act includes relief for federal student loan borrowers, primarily in the form of suspended payments and interest accrual on federal Direct and FFEL loans held by the Department of Education from March 13, 2020 until September 30, 2020.
Significantly, suspended payments during this time period will count as qualifying payments for Public Service Loan Forgiveness so long as 1) you have Direct loans, 2) you were on a qualifying repayment plan before the suspension, and 3) you’re working full-time for a qualifying employer during the suspension period. Similarly, payments will count toward time-based IDR forgiveness (the 20-25 year forgiveness plans automatically built in to all income-driven repayment plans). In other good news, these suspended payments will be reported to credit agencies as regularly scheduled payments, and therefore should not affect your credit score.
The payment suspension is automatic. All borrowers of federally-held direct and FFEL student loans have been automatically placed on what the Department of Education is calling an “administrative forbearance,” which will suspend payments during this time period. Because the change are automatic, auto-pay will be suspended. If you have made or will make any payments after March 13, contact your loan servicer if you want a refund.
Continue checking the Federal Student Aid COVID-19 FAQs as more updates become available. Your loan servicer’s website should also include updated information as it becomes available (for instance, see FedLoan Servicing’s website). You can read this section of the CARES Act here.
- You can keep making payments if you’d like, but you must take action. You may not be financially impacted by COVID-19, you may be trying to pay your loans off, or you may want to take advantage of the 0% interest rate to lower your loan balance. Whatever the reason, there is the option to continue making payments. To make a payment, you will either need to 1) opt out of the payment suspension (if you want to continue auto-pay), or 2) manually log on to your loan servicer’s website and make a payment. However, if you plan to pursue PSLF, make sure you do not get put on a paid-ahead status by paying more than what’s due. To do so, you should either manually select that you do not want to be put into paid ahead status or advance your due date, opt-out of the suspension, or contact your loan servicer to permanently remove paid ahead status (see FedLoans’ recommendation). If you are in a paid ahead status, your payments may not count as qualifying payments for PSLF.
- If you’re currently receiving LRAP funding, you are not required to continue making payments, but you will owe back any unused LRAP funding to the University at the end of your contract through the normal forgiveness/cancellation process. Unfortunately, we do not have unlimited funding, and according to the terms of your LRAP loan, any unused funds must be returned. Any unused funding due back to the University will have a 0% interest rate.
- As described above, if you continue utilizing your LRAP funding to make payments, BE CAREFUL! If you’re in the IDR Track and plan to pursue PSLF, make sure you do not get put on a paid-ahead status by paying more than what’s due. To do so, you should either manually select that you do not want to be put into paid ahead status or advance your due date, opt-out of the suspension, or contact your loan servicer to permanently remove paid ahead status (see FedLoans’ recommendation). If you are in a paid ahead status, your payments may not count as qualifying payments for PSLF. Check out EBCLC’s PSLF and CARES Act infographic about being in paid ahead status.
- Please reach out to us if you need assistance calculating what you should pay to avoid having unused LRAP funding, or what amount you might owe back to the University if you suspend payments. You’ll need your payment history during your current LRAP contract to calculate this accurately.
- You must continue making scheduled, monthly payments by October 1, 2020 to comply with the terms of Berkeley Law’s LRAP.
- If you’re not currently in an LRAP contract or if your current contract ends before October 1, 2020, you can always apply for continued LRAP support (check out our LRAP calculator to see if you’re eligible). If you don’t plan to make payments until October 1, 2020, then there’s no need to apply for a new LRAP award until then. However, if you plan to continue making payments, please apply for LRAP as you normally would.
- We suggest continuing to comply with all deadlines and requirements, such as submitting your annual IDR recertification on time, unless you hear otherwise from your servicer. IDR recertifications likely won’t be due until after the suspension, but our understanding is you can still complete your annual recertification at any time.
- If your loans were in forbearance before the CARES Act, we’re not yet sure how the forbearance will interact with the new CARES Act payment suspension. Generally, if your loans are in forbearance you cannot receive credit towards PSLF. You may need to end the forbearance early to receive the benefits of the CARES Act suspended payments, although we are not sure yet how this will work. Please continue checking in with your loan servicer to get their advice.
- CARES Act implementation. According to the Department of Education, related provisions of the CARES Act will be retroactive to March 13, 2020 and extend until September 30, 2020. Loan servicers had until April 10 to implement the CARES Act changes. If you still have payments due, please contact your loan servicer. You will be able to request a refund if necessary.
- Documentation. As always, continue to document everything related to your student loans for future use, especially if you plan on applying for PSLF. Document any conversations you have with your loan servicer about the new CARES Act provisions and save and download billing statements. You may receive a letter about the CARES Act from your loan servicer–save that, too!
- Communicating with your loan servicer. We understand that it’s been difficult to reach loan servicers by phone. Instead, try communicating with your loan servicer via email or online chat. Many people have even had success reaching out to their loan servicers on Twitter and Facebook!
2. Stimulus check
You might be receiving a stimulus check. The amount and your eligibility depends on your 2019 tax filing (or 2018 if you have not yet filed). The amount you receive will not be considered taxable income, and will not be considered income for LRAP purposes. Please do not include the stimulus check as income in your LRAP applications for funding or forgiveness.
3. 0% interest on federal student loans
Beginning March 13, 2020, all federal student loans (for current students and those in repayment) will have a 0% interest rate until September 30, 2020. This is great news! Your loans won’t be accruing interest during this time period. Any payments you make will go toward the principal balance of your loans, 0nce all the interest that accrued prior to March 13 is paid. This change is automatic—there is no need for you to do anything. You can read the related section of the CARES Act here.
4. Adjusting your income-driven repayment plan
Please know that it’s always an option to reduce your income-driven monthly payment amount if your income decreases and you can no longer afford your payment. This option might make sense if you want to continue making payments, but in a more affordable amount. Just know that you may owe back any unused LRAP funding to UC Berkeley if you decrease your monthly payment.
5. Private student loans
If your income has been affected by COVID-19 and you have private student loans or institutional loans (e.g. refinanced loans, bar study loans, Perkins loans, etc.), please reach out to your lender directly to discuss your options. Some lenders are providing forbearances, interest rate reductions, and extended payment timelines to borrowers who submit a request.
6. Institutional loans
If you have an LRAP loan due back to the University, a Perkins loan held by the University of California, or a Bar Study loan, the UC System has implemented some changes to mirror the CARES Act as much as possible. All late fees and interest will be waived from April 15 – September 30, 2020. Payments can be suspended by requesting an administrative forbearance. Please contact Heartland ECSI to request a forbearance.
7. Halted collections on defaulted student loans
If you have a defaulted federal student loan (federally-held Direct or FFEL loans), the Department of Education has stopped requests to withhold wages, tax refunds, and Social Security benefits, effective March 13. The DOE has also instructed private collections agencies to stop reaching out to borrowers. If you have a loan in delinquent or default status, please reach out to us for assistance. You can read the related section of the CARES Act here.
8. Watch out for scams!
There has been in increase in student loan scams since the COVID-19 outbreak began. Be aware of scammers and know that the federal government will never call to ask for a fee to suspend your loan payments. Report any scams to the FTC.
9. LRAP payments
Please note that due to multiple shelter in place orders, Financial Aid Office staff are not in the office. If you’re awaiting an LRAP payment, please sign and scan or take a photo of your award documents and email them to us. After that, please mail the completed original documents with wet signatures to the Financial Aid Office, UC Berkeley, School of Law, ATTN: LRAP, 226 Law Building, Berkeley, CA 94720-7200. We are required to keep these original documents for our records, but please know that if you solely mail your documents and do not email them, we will not be able to open your mail until May at the earliest. We strongly recommend you email us your documents to receive a prompt LRAP payment.
Our understanding is that the suspended “payments” made during the CARES Act forbearance may not be credited to your account as qualifying payments for PSLF until after September 30, 2020. If you were planning to apply for PSLF between March 13 and September 30, 2020, you should still move forward with applying. Loan servicers should be able to credit any CARES Act payments to you account before September 30 in those circumstances.
If you continue making payments during the CARES Act suspension, BE CAREFUL! If you plan to pursue PSLF, make sure you do not get put on a paid-ahead status by paying more than what’s due. To do so, you should either manually select that you do not want to be put into paid ahead status or advance your due date, opt-out of the suspension, or contact your loan servicer to permanently remove paid ahead status (see FedLoans’ recommendation). If you are in a paid ahead status, your payments may not count as qualifying payments for PSLF.
We’ll continue updating this page once we learn more. Please don’t hesitate to email us or make an appointment to discuss any specific concerns or questions you may have. Since we are not in the office, we will not be able to answer your calls.
last updated June 12, 2020