The CARES Act, which is the new $2 trillion stimulus bill, expands upon previous announcements from the federal government regarding student loan repayment. Note that if your student loans are not from the federal government or you are unsure, you should contact your lender to determine your eligibility.
Here are five pieces of the CARES Act that impact federal student loans:
1. Stop paying your federal student loans
The CARES Act allows you to stop paying your federal student loans from now through September 30, 2020. You don’t have to stop paying your federal student loans, however, but you have the option. Your student loan balance will not change between now and September 30, meaning the federal government is not paying your student loans for you.
2. No interest on federal student loans
The CARES Act waives student loan interest on your federal student loans through September 30, 2020. The president previously announced through executive action that he is waiving interest on federal student loans. If you decide not to pay your federal student loans during this period, your federal student loan interest rate will be set to 0% and you won’t be penalized with any interest accrual.
3. Skipping payments counts for Public Service Loan Forgiveness
The Public Service Loan Forgiveness program requires 120 monthly student loan payments, although the payments do not have to be consecutive. If you are pursuing public service loan forgiveness, and decide to skip payments through September 30, 2020, the skipped payments will count toward toward the required 120 monthly payments.
4. Tax-Free employer contributions for student loans
If your employer pays student loans as an employee benefit, there’s more good news in the CARES Act. Now, your employer can pay up to $5,250 of your student loans tax-free to your employer this year.
5. Suspension of Student Loan Debt Collection
The CARES Act also stops involuntary collection of student loan debt during this period, including garnishment of wages, tax refunds and Social Security benefits.