Student Loan Changes in the CARES Act
Posted by Kevin on July 2, 2020 under Bankruptcy Blog | 
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The 880-page Coronavirus Aid, Relief, and Economic Security Act (“CARES”) has 4 pages of help for certain student loan borrowers. Section 3513 of CARES. It provides meaningful but temporary help for those who qualify by having the right kind of student loan.
The Kinds of Student Loans Covered
First, the relief applies only to federal student loans, not to private student loans.
Second, not all federal student loans are included. Direct Loans—those made directly by the federal government’s Department of Education—are covered. Federal Family Education Loans—FFELs—are covered if they’re currently owned by the federal Department of Education. FFEL loans held by commercial lenders and campus-based Perkins loans are not covered. These non-covered loans amount to only about 12 percent of federal student loan dollars, so most federal student loans are covered.
The Key Benefits
For the applicable federal student loans, CARES accomplishes the following:
- Suspends all loan payments through September 30, 2020.
- Waives interest during this suspension period.
- For credit reporting purposes, the lender must treat each suspended payment as if the borrower actually paid the payment.
- Student loan creditors must suspend involuntary collection during the suspension period.
- The payment suspension time counts for purpose of loan forgiveness and loan rehabilitation.
1. Payment Suspension
The new law suspends “all payments due for [applicable student] loans… through September 30, 2020.” Section 3513(a), CARES Act. The law did not specify when this non-payment period started. But since then the U.S. Department of Education has specified that the “administrative forbearance will last from March 13, 2020 through September 30, 2020.”
If you’ve already made a payment during the same March 13 through September 30, 2020, your student loan servicer should refund it to you (don’t hold your breath). This includes auto-debit payments, which are supposed to stop automatically during this same period.
2. Interest Waiver
No interest will accrue during the March 13 through September 30, 2020 period. Section 3513(b). This should happen automatically.
3. Credit Reporting
“During [this same] period… , for the purpose of reporting information about the loan to a consumer reporting agency, any payment that has been suspended is treated as if it were a regularly scheduled payment made by a borrower.” Section 3513(d), CARES Act. The suspended payments should show as actually made payments on your credit reports.
4. Collection Freeze
“During the [same ]period [the loan servicers] shall suspend all involuntary collection related to the loan.” Section 3513(e), CARES Act. The law lists three specific types of collection that are explicitly included: wage garnishment, tax refund offset, and administrative offset by “a reduction of any other Federal benefit payment.” But it also broadly adds “any other involuntary collection activity.” Section 3513(e)(1-4), CARES Act. So during the March 13 through September 30 period, no collection activity of any kind should happen on the applicable student loans.
5. Non-Payments Count
“[E]ach month for which a loan payment was suspended [counts] as if the borrower of the loan had made a payment for the purpose of any loan forgiveness program or loan rehabilitation program… for which the borrower would have otherwise qualified. Section 3513(c), CARES Act.
This means that you get credit for payment towards Public Service Loan Forgiveness (PSLF). Also, you get credit for payment on loan rehabilitation. you
