On March 27, the $2-trillion Coronavirus Aid, Relief and Economic Security (CARES) Act was signed into law. The bill is a good start and, while not perfect, does address many needs of our students, educators, and schools. It is intended to help stabilize workers, families, and the economy during the COVID-19 public health crisis, and is the third relief package Congress has passed during the coronavirus pandemic. NEA is also advocating for additional stimulus funds in a fourth package.
TEACH GRANTS AND TEACHER LOAN FORGIVENESS
These federal student loans, owned by the U.S. Department of Education, qualify for suspension of payment and interest accrual:
However, commercially held FFEL Loans and Federal Perkins Loans held by an institution of higher education do not qualify for suspension.
Your lender or school may provide these benefits should it choose to do so. If not, you may consolidate FFEL Loans or Federal Perkins loans not owned by the Department of Education into a Direct Consolidation Loan, which would be eligible for CARES Act suspension.
However, if you consolidate, after the relief period ends, the interest rate on your loan may be higher than what you are currently paying. In addition, any outstanding interest will “capitalize” when you consolidate, meaning that any outstanding interest is added to your principal balance.
Your servicer can provide information about how your loan balance, interest rate, and total amount to be paid would change if you consolidated into a Direct Consolidation Loan.
The CARES Act only affects the federal student loans mentioned above. If you have student loans from a private bank, you must continue to make monthly payments. Interest will also accrue for private student loans as normal.
Suspension means that borrowers are not required to make monthly student loan payments during this six-month period. Your credit history and reporting will not be affected should you choose not to or be unable to make any payments during the six-month period.
There are no monthly cancellations of student loans or payments made by the U.S. government under the CARES Act; your principle balance will remain the same in six-months if you choose to take advantage of this.
Suspension and protections from the CARES Act were effective immediately upon the law’s enactment on March 27. You do not need to opt-in to take advantage of the benefits.
This temporary relief stays in effect through September 30, 2020. After that date, interest accrual will resume and you will need to begin making monthly payments, unless Congress extends the program. Starting August 1, student loan borrowers will receive notices either by electronic communication, telephone, or postal mail to help inform them that regular payments and interest accrual will resume after September 30.
The CARES Act overrides the President’s previous executive order. Additionally, to take advantage of the two-month suspension period that the executive order offered, a student borrower must have opted-in by contacting their federal loan servicer.
Under the CARES Act, you will not need to opt-in to take advantage of the six-month suspension. Payments were suspended and interest stopped accruing when the CARES Act was signed into law.
To receive Public Service Loan Forgiveness, you must make 120 on-time payments under a qualified income-based repayment plan. For example, if you have made up to 60 payments by the time the CARES Act goes into effect, you will have 66 on-time payments made at the conclusion of the suspension period on September 30, 2020.
Yes, if you are in a financial situation that allows you to continue making payments during the COVID-19 pandemic, you may continue to do so. Your payments would apply as they normally would toward paying down principal and previously accrued interest. However, new interest will not accrue during this six-month period.
You will not receive additional credit toward your 120 on-time payments if you choose to continue paying during this six-month suspension.
For educators who could not finish their year of teaching service as a result of COVID-19, their partial year of service will be counted as a full year of service toward TEACH grant obligations.
For educators who could not finish their year of teaching service as a result of COVID-19, their partial year of service will be counted as a full year of service toward Teacher Loan Forgiveness. Additionally, the CARES Act waives a requirement that teachers must serve consecutive years of teaching service for Teacher Loan Forgiveness eligibility, if a teacher’s service is not consecutive as a result of COVID-19.
For more information, contact Ronny Lau, federal lobbyist, NEA Government Relations, at [email protected] .