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 our latest webinars:
- Know Your Rights: Laws & Policies to Protect Student Loan Borrowers (recording & Google Slides available). Presented on October 26, 2020.
- Know Your Rights: COVID-19 and Student Loans (recording & Google Slides available). Presented on April 15, 2020.
Additionally, check out Berkeley Law’s Center for Consumer Law & Economic Justice’s Student Loans & COVID-19 consumer protection guide.
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.
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, 2020 contact your loan servicer if you want a refund.
Both the Trump & Biden administrations extended this relief a few times. Relief currently lasts from March 13, 2020 through January 31, 2022.
If you’d like, you can make payments during the forbearance, 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) log on to your loan servicer’s website and make manual payments.
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. There have been some recent updates to this policy if your loan servicer is FedLoan Servicing, but if your loan servicer is not FedLoans or you made payments before August 2020, it is better to be cautious and ensure your loans are in the correct status.
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. 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.
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.
You must continue making scheduled, monthly payments when the forbearance ends to comply with the terms of Berkeley Law’s LRAP.
If you will continue to take advantage of the forbearance, we recommend not applying for LRAP support this winter. This will prevent you from having to pay back unused LRAP funds that you won’t end up needing.
If you do plan to make payments through the forbearance (because you’re in the Standard Track, are receiving support for private loans, or you plan to pay off your loans instead of using PSLF), we are happy to continue with the LRAP application and awarding process. Additionally, if you’re running up against the 3.5 year deadline to apply for and enter LRAP for the first time, we recommend applying for LRAP anyway on your existing deadline (3.5 years) or the deadline we’ve communicated to you personally.
If you’re on Income-Driven Repayment, you should not be required to recertify your income-driven repayment plan during the forbearance period. Many IDR plans have been extended by 6 or more months–check your account or ask your loan servicer to see your new IDR recertification and expiration dates. If your income or employment has changed because of COVID-19 and you’re worried about being able to afford your payments, you can do an early recalculation of your IDR plan to reduce your payment.
As always, continue to document everything related to your student loans for future use, especially if you plan on applying for PSLF. Document any communications or letters from your loan servicer about the CARES Act, the forbearance, and 0% interest rates, and save and download billing statements.
Other Loan Updates
Beginning March 13, 2020, all federal student loans (for current students and those in repayment) will have a 0% interest rate until January 31, 2022. 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, 2020 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.
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.
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, 2020 – January 31, 2022. You can request an administrative forbearance so that no payments will be due through at least December 31, 2020. Administrative forbearances will automatically be applied to past due accounts through January 31, 2022. If you are not able to make payments, please contact Heartland ECSI to request a forbearance or deferment, or use this form.
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.
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.
The suspended “payments” made during the CARES Act forbearance may not be credited to your account as qualifying payments for PSLF until after the forbearance ends. The only way to check is by submitting a new PSLF form to document your employment and track your payments. If you were planning to apply for PSLF between March 13, 2020 and January 31, 2022, you should still move forward with applying. Loan servicers should be able to credit any forbearance “payments” to you account 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.
If you plan to pursue PSLF, make sure to submit a new PSLF Form to certify your employment and payments once the forbearance ends. This will ensure you’ve gotten proper credit for all your payments or non-payments from March 13, 2020 – January 31, 2022 while the forbearance was in place.
On October 6, 2021, the Department of Education announced new improvements to the Public Service Loan Forgiveness program to restore the promise of PSLF. Read on for specifics, how to see if you’re eligible, and how to apply.
The Dep’t of Ed is calling the new improvement a “Limited Waiver Opportunity.” Made under the Department’s executive authority during an emergency, the waiver will be in place until October 31, 2022. The waiver will allow borrowers to receive PSLF credit for all payments made while working full-time for a PSLF-qualifying employer, regardless of federal loan type or payment plan. This includes loan types and repayment plans that were previously not eligible for PSLF, and payments that were late or not made in the full amount due.
The waiver alone will benefit over 550,000 borrowers. An estimated 22,000 borrowers will be eligible to have their loans immediately discharged through PSLF, and another 27,000 borrowers could potentially be immediately eligible for PSLF if they certify additional periods of employment. Around 60% of borrowers who submit PSLF Forms have ineligible FFEL loans–this waiver will help those borrowers become eligible.
You might be receiving stimulus checks. The amount and your eligibility depends on your tax filings. 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.
FedLoan Servicing, Granite State Management & Resources, and Navient recently announced they will not renew their contracts with the Department of Education. If your loans are managed by one of these servicers, they will be transferred to a different servicer by the end of the year.
If your servicer is FedLoan Servicing, your loans will be transferred to MOHELA. If your servicer is GSMR, your loans will be transferred to Edfinancial. And if your servicer is Navient, your loans will be transferred to Maximus / Aidvantage.
To prepare for the transition:
- Update your contact information now so you can receive emails and letters about the transition to the correct address.
- Download and save everything you can from your loan servicer’s website–payment histories, billing statements, income-driven repayment plan documents, PSLF/Employer Verification Form acceptances and approvals, notices about the federal forbearance, etc.–before the transfer occurs. Keep all of those documents saved for your PSLF records. Some borrowers have had problems after previous transfers, with new loan servicers claiming some payments didn’t count toward PSLF. You’ll want to make sure you have proof of all your payments so you’re able to refute any claims like that if they arise.
- Take note of your loan balance at the time of the transfer. Once your transfer is complete, make sure the loan balance is correct.
- Your existing repayment plan should transfer over with your loans, but make sure your monthly payment amount is correct after the transfer is complete.
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.
last updated October 13, 2021