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 or sign up for an upcoming presentation. Additionally, check out Berkeley Law’s Center for Consumer Law & Economic Justice’s student Loans & COVID-19 consumer protection guide.
Federal student loan forbearance extended through August 31, 2022
On April 6, 2022, President Biden directed the Department of Education to further extend the COVID payment pause on federal student loans through August 31, 2022. The continued pause is meant to give borrowers more time to achieve financial security and prepare for repayment, and also provide the Dep’t of Ed and the loan servicers additional time to implement Public Service Loan Forgiveness (PSLF) and student loan program improvements.
As has been the case since March 13, 2020, federal student loans held by the Department of Education will not have payments due until after August 31, 2022, and interest rates will continue to be set at 0%. Months spent in the COVID payment pause will count toward PSLF and time-based Income-Driven Repayment (IDR) Plan forgiveness programs, assuming all other requirements are met. Reminder: if you’re planning on pursuing PSLF, you should submit a PSLF Form documenting your employment and payments annually and every time you leave a job. If you haven’t done this recently, it’s a great time!
Borrowers do not need to recertify their IDR plans during the COVID payment pause, and the earliest borrowers will be asked to recertify is November 2022. Therefore, there’s no need for you to take any action, unless you’re entering an IDR plan for the first time, changing the type of repayment plan you’re in, or need to reduce your monthly payment amount.
This is the first payment pause extension that comes with a “fresh start” for borrowers whose loans are in default. For borrowers with Direct, FFEL, HEAL, or Perkins loans held by the Department of Education, these loans will no longer be in default upon the expiration of the payment pause.
Details about the pause and next steps will continue to come from the Department of Education. As always, you should check studentaid.gov for the latest announcements.
OPTION 1: You can hold on to your LRAP funds for now and utilize the forbearance by not making federal student loan payments. You will owe back any unused LRAP funds to UC Berkeley at the end of your LRAP contract. Feel free to contact us if you’d like an estimate of that amount ahead of time.
- You will still receive credit toward PSLF even if you do not make payments, assuming you meet all other requirements (full time employment with a 501(c)(3) nonprofit or in government, Direct federal student loans enrolled in a qualifying repayment plan; documenting your employment with PSLF Form(s))
- You can read more about our LRAP loan forgiveness policies and procedures in pages 14-18 of our LRAP Handbooks.
OPTION 2: You can use your LRAP funds as directed by your latest LRAP contract. You can either opt out of the forbearance or make manual payments on your student loans.
- You are now allowed to prepay for up to 12 months, or when your IDR recertification is due (whichever is sooner) and still have your payments count toward PSLF. Therefore, making payments during the forbearance shouldn’t cause a paid ahead status issue. If you are concerned about paid ahead status interfering with PSLF, you can opt out (scroll to the bottom of this page for instructions).
OPTION 1: Wait until later this summer to apply for an LRAP contract starting September 1. We’ll send periodic reminders about the best time to apply, but for now we suggest applying in August. Do not apply now if you want your contract to start in August–your information will be out-of-date by the time we issue your LRAP award.
OPTION 2: You can apply for LRAP now or as scheduled if you don’t want to utilize the forbearance and want an LRAP contract that starts before September 1.
OPTION 3: If you are approaching your 3.5 year deadline to enter LRAP or are otherwise concerned about the deadline, but still want to utilize the federal forbearance, you can apply to pre-qualify for LRAP now.
- You can receive credit toward PSLF even if you don’t make payments during the forbearance. Months will count toward PSLF whether you make a payment during the forbearance or not. Making payments during the forbearance will not get you to PSLF any sooner.
- For those that graduated during the forbearance (classes of 2020 and 2021), the first month you were able to “make” a PSLF-qualifying payment was when your 6-month grace period ended after graduation. Every class year receiving this email is now in repayment (not in a grace period or deferment), and therefore is able to make progress toward PSLF.
- To ensure you qualify for PSLF, make sure you’re working full-time for a qualifying employer, you have federal Direct loans, your loans are enrolled in a qualifying repayment plan, and that you submit a PSLF Form annually and each time you leave a job. You can read more tips on our website.
- Remember the PSLF Waiver is in place until October 31, 2022. Make sure to take any necessary action items before then if you think you’re eligible.
- Loan servicer changes are still occurring. Make sure you keep your contact info updated with your loan servicer and on studentaid.gov and read all communications about your loans. Download and save all documentation from your previous loan servicer before you make the switch for your PSLF records.
- Making payments during the forbearance is a good idea if you’re able, since interest rates are 0%. This allows you to reduce the principal balance of your loans once any unpaid interest is paid.
- If you aren’t able to make payments, no harm done–your loans have not been growing since March 13, 2020 because the interest rate has been 0%. Your overall time to repayment, however, may be increased.
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, autopay 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 August 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. 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, but if you made payments before August 2020, it is better to be cautious and ensure your loans are in the correct status.
If you’re on Income-Driven Repayment, your plan was automatically extended during the COVID forbearance. Here’s what you should do now to figure out your IDR plan details:
To check if you’re enrolled in an income-driven repayment (IDR) plan, log in to your Federal Student Aid account. Click your name at the top right, then “My Aid.” Scroll down to “Loan Breakdown,” then expand and view your loan details. Each loan should have an affiliated Repayment Plan. The plans that qualify for LRAP are Income-Based Repayment (IBR), New Income-Based Repayment (New IBR), and Pay As You Earn (PAYE). You can also find your repayment plan on your loan servicer’s website.
If you’re not currently in an income-driven plan, you need to apply soon. Application processing can take up to a few months. Once approved, you’ll get an IDR approval letter that you can use to apply to LRAP.
If you’re already in an income-driven plan, you need to figure out how much you’ll be paying come September. To successfully apply for LRAP, we need to know 1) your monthly payment amount and 2) when your IDR plan starts and ends.
If you recently applied for, recertified, or recalculated your IDR plan, you should have a letter from your loan servicer indicating your monthly payment amount and plan start and end dates. Use this letter to apply to LRAP.
If you haven’t recertified your IDR plan recently, you should message, email, or call your loan servicer. Request written confirmation of your IDR plan details and new recertification date so you can include them in your LRAP application.
If you can’t find your IDR information anywhere or want to update your plan, you can apply to recertify or recalculate your IDR plan. You should receive a new IDR letter with dates and details about your plan that you can use to apply to LRAP.
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.
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!
Other loan updates
Beginning March 13, 2020, all federal student loans (for current students and those in repayment) will have a 0% interest rate through August 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. Read the related section of the CARES Act.
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 – May 1, 2022. You can request an administrative forbearance so that no payments will be due through at least May 1, 2022. Administrative forbearances will automatically be applied to past due accounts. 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 August 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 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 – August 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. As of February 28, 2022, already over 80,000 borrowers have received PSLF under the new waiver, discharging over $5.6 billion in student debt. 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 or the California Department of Financial Protection and Innovation.
last updated June 30, 2022