The Coronavirus Aid Relief and Economic Security Act (CARES), passed in March 2020, provides multifaceted financial relief to Americans during the pandemic. A section of the law provides COVID-19 student loan assistance to those who’ve borrowed for higher education. Here’s our guide to that section’s provisions.
The CARES Act created a $14 billion fund for COVID-19 student loan assistance in the form of cash grants to students to pay for courses, technology, food, housing and childcare. Colleges and universities are responsible for awarding these grants.
Payment and collection suspensions
Under the new law, the U.S. Department of Education will suspend payments and interest collection on its direct loans and Federal Family Education loans until September 30, 2020. The law also suspends collections on delinquent loans through garnishments or interception of social security payments and tax refunds through that date. Students do not need to apply for this forbearance because the government will automatically apply the provision. The suspended payments will be added to the end of the loan term. The U.S. Department of Education will report to the three credit bureaus as though the payments are current.
Around 12 percent of federal student loans are not eligible for this benefit, nor are loans from private lenders. If you are in this situation and need COVID-19 student loan assistance, contact your lender to explore forbearance programs or refinance options.
Campus work-study programs are a cornerstone of student financial assistance, but college and university closings and other disruptions have prevented students from working during the pandemic. CARES allows schools to continue to pay students who have been prevented from fulfilling their work obligations because of the COVID-19 public health emergency.
Some employers help their employees with student loan repayment by reimbursing the employee or paying the lender directly. Under CARES, employers can provide up to a maximum of $5,240 in such payments between March 27 and the end of 2020 without the payment counting as a taxable benefit to the employee.
Related – The CARES Act: Financial Relief for Homeowners and Renters During the Coronavirus Pandemic