Temporary Federal Student Loan Relief | Part I

Posted by Cynthia Walker in Student LoansMarch 25, 2020(Last Updated December 29, 2022)•2 min read
Key Takeaways
  • On March 13, 2020, the president announced that interest would be waived on all federally held student loans. 
Are you ready to make some real money moves?

PART I: Eligibility 

Temporary Federal Student Loan Relief (COVID-19 Response)

 

Which loans are covered by the announcement?

 

All loans owned by the U.S. Department of Education (ED), including Direct Loans, Federal Perkins Loans, and Federal Family Education Loan (FFEL)

 

**Please note that some FFEL Program loans are owned by commercial lenders, and some Perkins Loans are held by the institution you attended. These loans are not eligible for this benefit at this time**

 

How can I take advantage of this program if I have Federal Family Education Loan (FFEL) Program and Federal Perkins loans not owned by ED?

 

You could consolidate your FFEL Program or Federal Perkins loans not owned by E.D. into a Direct Consolidation Loan, which would be eligible. However, if you consolidate, and after the 0% interest rate waiver ends, the interest rate may be higher than what you are currently paying. Any outstanding interest will capitalize, meaning that any outstanding interest is added to your principal balance. Your servicer can provide you with information about how your loan balance, interest rate, and total amount paid would change if you consolidated into a Direct Consolidation Loan.

 

Who can tell me if my loans will have their interest rate reduced?

 

Contact your loan servicer online or by phone to determine if your loans are eligible. Your servicer is the entity to which you make your monthly payment. If you do not know who your servicer is or how to contact them, visit StudentAid.gov/login or call them at 1-800-4-FED-AID (1-800-433-3243; TTY for the deaf or hard of hearing 1-800-730-8913) for assistance.

 

If my loans are owned by ED, do I need to do anything for the interest on my loans to be waived?

 

No. Your monthly payment will remain the same, but the full amount of the payment will be applied to already accrued interest and/or outstanding principal. This means that you are likely to pay your balance down more quickly during this zero-interest period.

 

If I make loan payments after March 13, how will they be applied?

 

During the period of no interest, the full amount of your payments will be applied to the principal once all the interest that accrued before President Trump’s March 13 announcement is paid. As you will see below, you can suspend your payments for at least 60 days without additional interest accruing.

 

How long will interest be waived?

 

Interest will not accrue on federally held student loans for at least 60 days, beginning on March 13, 2020. ED may extend that period, depending on the status of the COVID-19 national emergency 

 

Article written by Cynthia Walker, MBA, of FINLIT, LLC. Contact FINLIT or follow them on Twitter and Facebook.

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