The CARES Act stimulus package (Coronavirus Aid, Relief and Economic Security) is designed to give people more financial security during the COVID-19 pandemic. Here’s how the Act could help you save money if you’re currently paying off a loan.
Some Loan Requirements and Payments Are Suspended
Some of the benefits of the CARES Act are automatic, so you don’t even have to apply for them. For example, payments on a number of federally-owned loans are suspended automatically through September 30, 2020. If you have one of these loans and go to pay online, you’ll see a message that you don’t owe anything. You may also see a message that payments are suspended.
During the suspension, accumulation of interest has been halted for federally-owned loans like FFEL loans, Federal Perkins loans, defaulted HEAL loans and certain Direct Loans. It’s important to remember that these CARES benefits only apply to certain federal loans and private loans don’t qualify. If you’re not sure if your loan is covered by the CARES Act, you should talk to your loan service provider.
In addition to suspended payments and interest, student debt collections like wage or Social Security garnishments are also suspended. All suspended payments will be counted by national credit bureaus as on-time payments.
If you made a payment on a qualifying loan after the CARES Act was signed, you can even ask your loan service provider for a refund.
Some Suspended Payments Count Toward Forgiveness Requirements
If you’re participating in an income-driven repayment plan or the Public Service Loan Forgiveness (PSLF) program, you won’t need to pay those for a longer period of time because of the CARES Act. All suspended payments will count toward the forgiveness requirements for these two loans. You’ll still need to meet a few qualifications, so check with your loan service provider for details.
You’ll see some tax benefits, too. For the rest of 2020, employers can pay up to $5,250 toward employees’ student loan debt. This will be tax-free—the payments won’t count as income on your tax return.
What If Your Loan Doesn’t Qualify?
If you have a loan that doesn’t qualify, you can ask your lender for forbearance. If you do so, you won’t have to make loan payments for a certain period of time, though interest will continue to grow. Some lenders are offering forbearance for time periods from a few months to up to two years, while others are offering a reduced interest rate for a limited period of time.
Preparing for the Future
If you haven’t yet gone to college, there are ways to prepare for the costs of student loans in a world still grappling with a pandemic. The College Tuition Benefit Program, offered in partnership with SAGE Scholars, Inc., can help you save for and better afford future college debt, and is available for United Concordia members, participating dentists, their staff. Those who qualify earn points that can be applied toward college tuition at more than 400 colleges and universities, and students can use the points to pay for up to one year of college. Points earned can be shared with any registered student family members, including grandchildren, nieces and nephews.
To learn more, check out United Concordia’s College Tuition Benefit page here.