Student Loans
Q&A: Student Debt
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Student Loan FAQ

Maybe. The federal CARES Act, passed in March 2020, contains provisions to help some student borrowers who are struggling to pay back student loans because of COVID-19. The President issued an Executive Order in August that extended CARES Act relief, but this relief only applies only to some loans. It affects only those borrowers with federally-held loans—that is, loans owned by the US Education Department (ED). 

If you aren’t sure whether your loans are federally held, there are several ways to figure it out. First, try looking up your loan in the Department of Ed’s database by logging into studentaid.gov. If you see loans labeled "direct" then they're definitely covered by the CARES Act. 

If you see loans labeled "FFEL" (shorthand for a Federal Family Education Loan) then you’ll have to dig a little further because, while those loans were originated by private lenders (and ensured by the federal government), the Department of Ed bought some FFEL loans in 2008. So you may have to contact your loan servicer—the company listed on your monthly bill—to find out if you are covered. 

If your loans are federally held, payments between March 13 and December 31, 2020, should be suspended automatically, and interest should not accrue during that period. Your loan servicer is supposed to contact you before the pause on payments ends to alert you when your next payment will be due. 

Keep in mind, however, that this temporary pause of payments and interest accrual—known in the financial world as “forbearance”—does not eliminate any of your debt, which will likely have to be paid in full later. 

Also note that, while the payment pause is designed to kick in automatically, you should check to make sure that your account is not being debited electronically and that interest is not accruing.

If you have private loans, there is help available, but it is not automatic - you need to seek it out and ask for it. Many private lenders have forbearance options that allow borrowers to postpone monthly payments, some for up to 90 days. Some private lenders also are waiving late fees and will not file negative reports to consumer reporting agencies. To find out what is available to you, contact your student loan servicer.

Maybe. Student loans not covered by the CARES Act include FFELs held by banks and other financial institutions, Perkins loans (which are issued by colleges), and private loans. 

If your educational debt falls into one of these categories, your options will vary by lender—some are being more flexible than others. So your first step should be contacting your lender or servicer to ask about your options.  

Depending on your situation, you may qualify for what’s known as an economic hardship or unemployment deferral, which would enable you to pause payments without accruing interest. If your lender gives you that option, note that a deferral is better than forbearance, which temporarily suspends payments but typically does not stop interest from accruing.

You may have rights based on where you live. The District of Columbia plus 10 states—California, Colorado, Connecticut, Illinois, Massachusetts, New Jersey, New York, Vermont, Virginia, and Washington—recently negotiated agreements with major loan servicers to accommodate borrowers with non-federally held FFEL and private loans by providing a 90-day forbearance. Some of the servicers included in many of these states’ programs are: 

  • Aspire Resources, Inc.
  • College Ave Student Loan Servicing, LLC
  • Earnest Operations
  • Edfinancial
  • Figure Lending
  • Kentucky Higher Education Student Loan Corporation
  • Lendkey Technologies
  • MOHELA
  • Navient
  • nelnet
  • Rhode Island Student Loan Authority
  • Scratch Services
  • SoFi Lending Group
  • TFC Credit Corporation
  • Tuition Options
  • United Guaranty Services
  • Upstart Network, Inc.
  • Utah Higher Education Assistance Authority
  • Vermont Student Assistance Corporation

You must opt in to help by contacting your servicer. Check the website for links to coronavirus assistance, or call and ask. 

Before you accept any help, make sure you understand what relief you will get, how long it will last, and what your options are when that relief ends. 

Finally, borrowers with a mix of federal loans may be able to take advantage of federal forbearance by consolidating their loans under the federal direct loan program. There are downsides to this as well, and borrowers should consider the pros and cons carefully. You can find out more here: https://studentaid.gov/manage-loans/consolidation

If you can start paying...

Forbearance for federal student loans ends Dec. 31, 2020. Your servicer will contact you ahead of time to remind you that you will need to start making payments again. Borrowers should make sure their contact information is up to date with their servicer. 

If you can pay some but not full payment...

It depends on your current situation. 

If you’re currently on an income-driven-repayment plan (IDR) - a repayment plan that sets your monthly student loan payment at an amount that is intended to be affordable based on your income and family size - and you’ve lost income, you should apply to have your payment recalculated. To do so, visit StudentAid.gov/idr, click on “Apply Now,” and then start the application by clicking on the button next to “Recalculate my monthly payment.” After the administrative forbearance ends on Dec. 31, 2020, your monthly payments will resume at the new amount.

If your income dropped, you have federal student loans, and you would like to have your payments calculated based on your income, you can apply to enroll in an income-driven-repayment plan. Visit StudentAid.gov/idr, click on “Apply Now,” to  start your application.

If you can’t pay anything...

You need to seek help. If you have a loan that is owned or insured by the federal government, and are in an income-driven repayment plan, you can have your payment recalculated, potentially as low as zero. To do so, visit StudentAid.gov/idr, click on “Apply Now,” and then start the application by clicking on the button next to “Recalculate my monthly payment.” If you are not currently in an income-driven-repayment plan, apply for one by visiting StudentAid.gov/idr, and clicking “Apply Now.”

If you have loans covered by the CARES Act and are enrolled in an income-driven repayment (IDR) plan or are making payments toward Public Service Loan Forgiveness (PSLF), you should get credit during the forbearance period as if you were making payments. In other words, your progress toward completing an IDR plan or PSLF should not be delayed as a result of the forbearance. 

Be sure to check your account to make sure you are getting credit. You can find out how many qualifying payments you’ve made by logging in to your account at FedLoan Servicing and viewing your loan details or by looking on your most recent billing statement

Yes. If you would like to keep making payments on a CARES Act-covered loan during the forbearance period, you are free to do so. And because interest should not be accruing, payments made during the forbearance period will go entirely to reducing the principal balance.   

But remember, you do not need to make payments in order to sustain your progress toward the required number of payments on an income-driven repayment plan or for Public Service Loan Forgiveness: The CARES Act will give covered borrowers credit toward progress as if they were making payments.

Yes. If you have a loan covered by the CARES Act, you are entitled to a refund for payments made between March 13 and Dec. 31, 2020. Contact your servicer to arrange for a refund.

It shouldn’t. The federal law that provides COVID relief, the CARES Act, places important requirements on what companies that furnish information to consumer reporting agencies can report about consumers affected by the COVID-19 pandemic. If you have an accommodation—such as forbearance or a deferral—from your servicer, the servicer is supposed to report your account as current to the credit bureaus. That should mean that your credit score is unaffected. 

Consumers have reported problems with this provision of the CARES Act. While it’s always a good idea to check your credit report, it’s especially important if you are in forbearance or have a deferral. At least until April 2021, everyone can check their credit reports from the big three credit reporting agencies, Experian, Equifax, and TransUnion for free, as often once a week, at annualcreditreport.com. (After that, you’re entitled to one free credit report a year, per reporting agency, under the Fair Credit Reporting Act (FCRA) tkttk.) Checking your credit report does not affect your credit score. 

While everyone should check their credit reports for errors on a regular basis, this is especially true for those with student loans. Credit reporting complaints have skyrocketed since the pandemic started, and this has been a particular problem for student loan borrowers. One of the country’s largest student loan servicers, Great Lakes, has acknowledged improperly reporting the loan status of as many as 5 million borrowers, and many of them took a hit on their credit scores as a result. 

The three major credit reporting agencies—Experian, TransUnion, and Equifax—are letting people check their reports free on a weekly basis, at least until April 2021, at annualcreditreport.com. Pulling reports online from all three agencies typically takes 10 or 15 minutes. 

If you notice any errors, contact the reporting agency to correct them. But note that credit reporting agencies have a poor record when it comes to fixing their mistakes, so it pays to take extra care when requesting an investigation.  Inaccurate negative information on your credit report could result in your being denied credit, or charged a higher interest rate, should you seek credit in the future.

Keep in mind that it’s often necessary to dispute an error with more than one of the three major reporting agencies. And although they’re the ones that have a legal obligation to investigate your complaint, you should also notify the creditor behind the disputed information.

You can use the credit agency dispute forms, either found online or sent in the mail along with your credit reports, but these often limit your options. So either skip the forms entirely and write your own letter explaining the errors, or supplement the forms with additional details and comments. 

After printing copies to keep, submit your documents via certified mail to the address on your credit report, and maintain the return receipt for your records. And keep a detailed list of every document you send to, and any conversation you have with, the credit reporting agencies and the creditor involved.

Finally, each credit agency must send you written results of its investigation within five business days of its completion. And if a creditor finds that your dispute has merit, it must notify the three agencies so that they can correct your file.

For federal loans, a borrower is considered to be “in default” after failing to make payments for 270 days. For private lenders, the timing varies but is typically around 180 days. At that point, the lender typically refers the loan to a collection agency. 

If you had a federally held loan, and it was in default when the CARES Act was passed, there should be no collections activity occurring on your loan between March 2020 and and December 31, 2020. 

Note, however, that the Department of Education has reportedly failed to implement that change in some instances. You may need to contact the Department of Education and the Treasury Department to report any improper collections activity. 

Yes. There are generally three ways to get out of default: paying the full balance due in a lump sum; consolidating your loans; or entering a rehabilitation plan. 

Loan consolidation allows you to pay off one or more federal student loans with a new consolidation loan. Benefits of consolidation include eligibility for forbearance and deferral, and the opportunity to qualify for different repayment plans, including income driven repayment plans—which, depending on your income, can require monthly payments of as low as zero. 

To consolidate a defaulted federal student loan into a new Direct Consolidation Loan, you must either

  • agree to repay the new Direct Consolidation Loan under an income-driven repayment plan, or

  • make three consecutive, voluntary, on-time, full monthly payments on the defaulted loan before you consolidate it.

Rehabilitation is different from consolidation and has its own pros and cons. You contact your collector and request to be placed on a “reasonable and affordable” repayment plan.  After that, you must make at least nine on-time payments in a ten-month period.  When your loan is rehabilitated, the default status will be removed from your loan, and collection of payments through wage garnishment or Treasury offset (debt collection by the United States Department of the Treasury) will stop. You’ll regain eligibility for benefits that were available on the loan before you defaulted, such as deferment, forbearance, a choice of repayment plans, and loan forgiveness. You’ll be eligible to receive federal student aid. And the record of default on the rehabilitated loan will be removed from your credit history. 

However, your credit history will still show late payments that were reported by your loan holder before the loan went into default.

There are special rules for rehabilitation under the CARES Act. If you’re already in a rehabilitation plan, all of your suspended payments will count toward rehabilitation. If you enter a new rehabilitation agreement between March 13, 2020, and Dec. 31, 2020, suspended payments that would have been made from the beginning of your agreement until Dec. 31, 2020, will count. For example, if you enter a new rehabilitation agreement on Sept. 5, 2020, and your payment due date is Sept. 15, suspended payments will count toward your successful rehabilitation for September, October, November, and December. You will not get credit for suspended payments for March through August, the months before you entered your new rehabilitation agreement.

If you rehabilitate a defaulted loan and then default on that loan again, you can’t rehabilitate it a second time. Rehabilitation is a one-time option.

Read more about the pros and cons of both consolidation and rehabilitation here: https://studentaid.gov/manage-loans/default/get-out

The most important thing is to avoid default by seeking help as soon as possible—ideally before you have to stop paying your loans, but if not then as soon as possible after missing a payment. If you do not take steps immediately to get out of default, the government can garnish your wages, offset Social Security benefits, and seize tax refunds. The Department of Education will report your defaulted loan to the Treasury Department, which will then issue orders to seize funds. So it makes sense to contact your servicer right away if you are in financial trouble.

If you default on a private loan, your options are relatively limited. But it’s important to remember that you do have rights. Among other things, it is against the law for a debt collector to abuse, harass, or make false statements to you. 

In addition, every debt collector must, within five days of contacting you, send a written “validation notice” that specifies the creditor; indicates how much money you owe; tells you how to get information about the original creditor (if the loan has been sold off); and enumerates your dispute rights if you don’t believe the debt is legitimate. Keep this notice and use it as a reference when speaking with a debt collector.

You may receive a notice that your entire student loan must be paid off immediately and in full. But you may be able to negotiate to settle your debt for less than you currently owe, or set up a payment plan. 

For more information about how to deal with defaulted loans, see https://www.consumerfinance.gov/paying-for-college/repay-student-debt/

For those needing legal help, it is available. If your income is below a certain level, you may be able to get help from a local legal aid office, some of which take clients with student debt issues. (Click here for how to find a legal aid office in your area.)

For those looking to hire an attorney, the National Association of Consumer Advocates has a lawyer lookup here.

However, be wary of companies saying they can get you debt relief for a fee.  “Student debt relief” companies have been the subject of recent investigation for making false promises to borrowers, and taking their money without helping them manage their loans. 

There are several ways to have your student loan obligations eliminated without any negative consequences. The three terms for this process—forgiveness, cancellation, and discharge—are used in federal law for different scenarios and programs, but they basically mean the same thing. 

Public Service Loan Forgiveness (PSLF) is a formal federal program for federal student loan borrowers that zeroes out a qualifying borrower's student loan balances after the borrower meets certain requirements. 

  • Only federal student loans are eligible. (But not all federal loans are eligible—only those received under the William D. Ford Federal Direct Loan Program (Direct Loans) qualify. The Federal Family Education Loan Program (FFEL) and the Federal Perkins Loan do not. But FFEL and Perkins loans may qualify if consolidated into a Direct Consolidation Loan.) 

  • To qualify, the borrower must make 120 on-time payments on those loans under an income driven repayment plan. (You can find out more about income driven repayment here.)  You must pay the exact amount on your monthly bill - not a penny more, not a penny less - for your payment to qualify.

  • To qualify, the borrower must work full-time (at least 30 hours per week) for a U.S. federal, state, local, or tribal government, or for a not-for-profit organization that is tax exempt under Section 501(c)(3) of the Internal Revenue code. (Speak with your employer if you are unsure if it qualifies as a not-for-profit.) 

  • You and your employer should submit an employer certification form (ECF) as you work toward Public Service Loan Forgiveness.  It is a best practice to submit your ECF annually while at your current employer, and also at any time you change employers.

More information can be found here

Only certain types of loans are eligible for Teacher Loan Forgiveness. You are eligible for student loan forgiveness of up to $17,500 on a Direct Loan or FFEL loan if you teach full-time for five complete and consecutive academic years in a low-income elementary school, secondary school, or educational service agency. You can find out more about Teacher Loan Forgiveness here.

If you have Direct Loans, FFEL loans, or Federal Perkins Loans and you were unable to complete your education because your school closed, you may be eligible for a 100% discharge of your loan. This could mean that you no longer have an obligation to repay the loan; you will be reimbursed for payments already made on the loan; and any record of the loan will be removed from your credit reports. 

In order to qualify, you must have been enrolled in classes (or on an approved leave of absence) when the school closed, or your school must have closed within 120 days of the date on which you withdrew from the school. 

You are not eligible if you completed coursework for the program before it closed, or if you transferred to and are completing your education at another school, through a teach-out, or by transferring academic credits or hours earned at the closed school to another school. 

If you qualify, contact your loan servicer to learn about the application process for getting your loan discharged. For more on closed school discharge, read this.