There has been some confusion as to what affect the CARES Act has on Federal student loans. Prior to the CARES Act, the president announced a 60-day waiver of student loan interest and suspension of student loan payments and garnishments. The CARES Act expands on those provisions. Here are the facts:
- There is NO direct (see #3 for clarification) forgiveness of federal student loans. Both sides of the aisle originally proposed some but it was not part of the final package.
- What is included in the act are the following automatic benefits:
- No student loan payments until September 30, 2020
- No accrued interest on student loan balances from now until September 30, 2020
- No garnishments of wages, Social Security and tax refunds for student loan debt collection until September 30, 2020.
- For those who are currently part of Public Service Loan Forgiveness, there is a possibility of some debt forgiveness. Public Service Loan Forgiveness is a program for those graduates that chose to dedicate themselves to working for the public’s benefit, i.e. federal or state government agency, at a qualified non-profit or in certain fields.
- One of the qualifications of this program is the payment of full, on-time payments towards your existing loans for a total of 120 payments. At the end of 10 years, the balance on these loans is forgiven.
- Any payments unpaid between now and September 30, 2020, will be considered paid towards the fulfillment of this requirement.
- The forbearance of these payments will not affect the payment requirement.
- This will result in a larger percentage of the loans being forgiven at the end of 10 years.
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