Illustrated by Chelsea Miller
Last Updated November 03, 2022

The CARES Act: Student Loans

If you or your dependents have federally owned student loans, revisions in the CARES Act can help reduce that burden temporarily.

Suspended Payments

The CARES Act created an automatic suspension of principal and interest payments on federally owned student loans from March 13 to September 30, 2020. The interest rate will be set to 0% during this time. Essentially, this means that you won’t see any consequences for not making payments and interest won’t continue to accrue.

Efforts to collect on federal students loans that are currently in default, including garnishment of wages or benefits, have also been suspended.

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Chelsea Miller

The repayment suspension does not currently apply to borrowers with Federal Family Education Loans (FFEL) owned by commercial vendors or Perkins loans owned by an educational institution. These loans are federally backed but not federally owned. Private student loans are also not eligible for suspension at this time.

Benefits During Suspension

After all the interest accrued before March 13 is paid, any payments you make during the suspension period will go toward principal. If you have the means to make payments at this time, it may be a good opportunity to pay down your remaining balance. That being said, your financial stability in this uncertain time should come first. If you do decide to make payments, it’s wise to confirm with your loan servicer that the amount is being applied correctly. Finally, payments made during the suspended period can be refunded if needed.

These months will also still count toward the 10-year period to qualify for Public Service Student Loan Forgiveness as though you made your regular payments—as long as you’re working full-time for a qualifying employer. Here, too, you’ll want to be sure the employment is credited accurately.

Expanded Employer Assistance

The CARES Act expands the ability of employers to help their employees with education expenses. In addition to providing tuition assistance to eligible employees, between March 27 and December 31, 2020, employers may repay up to $5,250 of an employee’s student loan obligations. This amount is tax free to the employee and is not included in his or her taxable income.

For more information and answers to more specific questions, you can check out this information page from the U.S. Department of Education.

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