If you are affected by the coronavirus pandemic, can you get your student loans forgiven? No. Although there isn’t any blanket loan forgiveness, there are current options for financial relief and there may be more in the future.
The House version of the CARES Act legislation, which was titled as the Take Responsibility for Workers and Families Act, included a proposal to provide up to $10,000 in tax-free forgiveness for all federal student loans. This proposal was dropped from the final legislation.
So, there is no student loan forgiveness specifically for borrowers affected by the coronavirus pandemic, but there are a few options.
Payment Pause Counts toward Loan Forgiveness
The student loan payment pause and interest waiver causes eligible federal student loans to be frozen until September 30, 2020, not forgiven. However, the 6 months of paused payments still count as payments toward student loan forgiveness programs such as Public Service Loan Forgiveness (PSLF) and the forgiveness of remaining debt after 20 or 25 years in an income-driven repayment plan.
Private student loans are not eligible for this payment pause, but many lenders are offering options to reduce or postpone payments.
FFELP student loans also do not qualify for the payment pause, but you can enroll in an income-driven repayment plan or include the loans in a Federal Direct Consolidation Loan to qualify.
Nothing stops you from continuing to make payments on your student loans, if you are able.
Don’t make extra payments on your student loans if you are pursing student loan forgiveness, since this can reduce the amount of forgiveness you will eventually receive.
If you decide to continue making payments on your student loans, the full payment will be applied to the principal balance of the loan. This is like having an extra $40 to $60 per month per $10,000 in student loan debt applied to the principal balance and can help you pay off your debt quicker, saving hundreds of dollars.
Consider having the full payment applied to the loan with the highest interest rate. This will save you the most money.
Death and Disability Discharges
All federal student loans and many private student loans are eligible for death and disability discharges. If a borrower becomes totally and permanently disabled or dies because of COVID-19, they may be eligible for a discharge of their student loans.
Future Forgiveness Is Possible
Congress may pursue additional financial relief. There may also be more legislation after the pandemic has ended to jump-start the economy. Possibilities might include
- Extending the payment pause and interest waiver to all federal loans, not just government held loans
- Allowing the payment pause to count toward public service loan forgiveness even if the borrower has been laid off from their public service job
- Adding a 3-year deferment for 2020 college graduates who are graduating into the worst job market ever
- Making college students eligible for the recovery rebate
- Providing some loan forgiveness, such as the $10,000 proposal that was dropped from the CARES Act
Some people have suggested that doctors, nurses and first responders in the front line of the battle against the coronavirus pandemic should have their student loans forgiven. There is currently no such program.
Joe Biden has proposed forgiving all undergraduate tuition-related federal student debt from public colleges and universities for borrowers earning up to $125,000. Students who borrowed to attend a Historically Black College and University (HBCU) or Minority-Serving Institution (MSI) would also be eligible.
Graduate student debt and private student loans would not be eligible.
This proposal would be implemented by having the federal government make the monthly payments on behalf of borrowers until the forgivable portion of the debt was paid off. It is not clear what “tuition-related debt” means, but it might involve capping the amount of forgiveness per borrower.
Joe Biden also supports cancelling $10,000 in federal student loan debt per borrower, allowing student loan debt to be discharged in bankruptcy and forgiving $10,000 per year for five years for borrowers working in public service jobs.
This is in contrast with President Trump’s proposals to end the public service loan forgiveness program.
The next election is shaping up to be a battle between proponents and opponents of loan forgiveness.
Financial Relief for Current College Students
Although many college students are ineligible for the recovery rebate stimulus checks, they may be eligible for a refund of room and board charges and other college fees. More than two-thirds of colleges are providing prorated cash refunds, and an additional fifth are providing credits or vouchers toward future college costs. Cash refunds can be used to pay down student loan debt.
College students may also be eligible for an emergency financial aid grant from their college through the Higher Education Emergency Relief Fund (HEERF) or using leftover Federal Supplemental Educational Opportunity Grant (FSEOG) funds. Although the emergency aid is intended to help students deal with unexpected expenses and expenses related to the coronavirus campus closures, it may help current college students borrow less.
The emergency financial aid grants must be paid directly to the student and cannot be applied to a balance due in the student’s account at the college. (Nothing stops a student from making a payment to their student account after they receive the money.) The payments may be transferred to the student’s bank account or debit card, or paid by check.
Beware of Student Loan Forgiveness Scams
Watch out for loan forgiveness scams that promise to forgive your student loans. These scams may take advantage of your desperation for financial relief. They may claim that borrowers can qualify for coronavirus forgiveness, when there is no such program.
If you have to pay money to get money, it’s probably a scam.