5 Things to Know About Current Repayment Flexibilities and Your Federal Student Loans

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On Jan. 20, 2021, the 0% student loan interest rate and suspension of payments on federal student loans owned by the Department of Education (ED) were extended through at least Sept. 30, 2021. These relief measures began on March 13, 2020, and below you’ll find a recap of the resulting repayment flexibilities for student loan borrowers and relevant considerations.

Check out StudentAid.gov/coronavirus for the latest updates.

1. Your Monthly Payments Are Suspended for ED-Owned Loans

How the Current Flexibilities Compare to General Forbearance   CURRENT PAYMENT SUSPENSION  •	Granted automatically  •	Payments suspended through at least Sept. 30, 2021 •	Interest doesn't accrue on loans owned by the U.S. Department of Education (ED) •	No interest capitalization will occur unless you were in an interest-capitalizing forbearance when the administrative forbearance started or if you consolidate Federal Family Education Loan (FFEL) Program loans and Federal Perkins Loans not owned by ED during the 0% interest period •	Suspended payments count toward the Public Service Loan Forgiveness (PSLF) Program and income-driven repayment (IDR) forgiveness if all other qualifications are met   GENERAL FORBEARANCE  •	Not granted automatically  •	May be granted for no more than 12 months at a time Interest accrues on all loans •	Unpaid interest capitalizes (i.e., it is added to principal balance) at the end of the forbearance on Direct Loans and FFEL Program loans, increasing the total outstanding amount due on the loan •	Suspended payments do not count toward PSLF and IDR forgiveness

ED placed your ED-owned student loans in a temporary payment suspension that started March 13, 2020. This means you don’t have to make monthly payments during this time. If you made a payment during this time, you can request a refund through your loan servicer.

Federal loan servicers were directed to report to credit reporting agencies as if regularly scheduled payments were occurring during the payment suspension period. Unless you chose to opt out of the payment suspension, servicers are reporting monthly payments of $0. Delinquency will not be reported during the payment suspension period, even if you chose to opt out of the payment suspension.

Generally speaking, if you were up to date on your payments before the payment suspension period began, interest accrued prior to March 13, 2020, will not capitalize. This means no outstanding interest will be added to your principal balance when the payment suspension ends.

However, if you were in the type of deferment or forbearance in which interest would normally capitalize prior to the payment suspension period, then interest accrued prior to March 13, 2020, will capitalize when your original deferment or forbearance ends or when the payment suspension ends, whichever is later.

If you were in your grace period before the payment suspension period began, any outstanding or unpaid interest on your account will capitalize as it usually does when you enter repayment.

2. Temporary 0% Interest Rate on Loans Owned by ED

Which Student Loans Are Eligible for the 0% Interest Rate?   All borrowers with federal student loans owned by the U.S. Department of Education (ED) will automatically have their interest rates set at 0% from March 13, 2020 to until the COVID emergency relief period ends.  Eligible Student Loans for 0% Interest Rate •	Federal Direct Loans (including Subsidized, Unsubsidized, Grad and Parent PLUS, and Consolidation Loans) •	Federal Family Education Loan (FFEL) Program Loans •	Federal Perkins Loans  Note: If you have any of the above loans and are currently in default, you are still eligible.   Ineligible Student Loans for 0% Interest Rate •	Private student loans  •	FFEL Program loans that are owned by commercial lenders •	Federal Perkins Loans that are owned by the school you attended   For more updates and resources, visit StudentAid.gov/coronavirus

Federal borrowers with student loans that are ineligible for the 0% interest period: YOU CAN CONSOLIDATE  FFEL Program loans owned by commercial lenders and Perkins Loans owned by the institution you attended are not eligible for this benefit at this time. To become eligible, you can consolidate.  How to check if your loans are eligible •	Log in at StudentAid.gov •	Click your name on the top-right, a menu will appear. Select “My Aid.” •	Scroll down to “Loan Breakdown.” •	Loans without “Dept of Ed” listed are not eligible at this time. Pros and Cons of Consolidation  Pros: You can consolidate loans not owned by the U.S. Department of Education into a Direct Consolidation Loan, which would be eligible for 0% interest rate.  Cons: If you consolidate, make sure you understand how consolidation will impact your loans after the 0% interest rate period ends to make sure it’s the right decision for you. The interest rate on your loan may be higher and any outstanding interest will capitalize.

From March 13, 2020, to the end of the payment suspension period, the interest rate on ED-owned student loans is automatically set at 0%. That means your student loans will not accrue (i.e., accumulate) interest during this time.

If you are able, continuing to make manual payments on the loan servicer’s website has some benefits.

Take advantage of the 0% period  •	Once interest accrued prior to March 12, 2020 is paid, the full amount of your payment will be applied to the principal balance •	You can pay off your loan faster •	You’ll lower the total cost of your loan over time  Note: To provide relief during the COVID-19 emergency, federal student loans were automatically placed in an administrative forbearance, temporarily allowing monthly loan payments to stop. Additionally, interest was temporarily set at 0% on federal student loans. Find more info and updates about the administrative forbearance period at StudentAid.gov/coronavirus.   Image of a woman sitting on the floor with her laptop and headphones.

3. Your Income Driven Repayment (IDR) Recertification Date Has Changed

As part of the administrative forbearance, your IDR recertification date has been changed from your original recertification date. You will be notified by your loan servicer when it is time to recertify.

If you were paying your student loans using automatic debit earlier this year, your automatic payments will resume after the COVID-19 emergency relief measures end. If you’d like to make a change to your payment method, you must contact your loan servicer online or by phone.

If you’re unsure about your next payment amount, contact your loan servicer to confirm your upcoming payment amount. This info may be available to you online by logging in to your loan servicer’ s website.

4. Avoid Coronavirus-Related Scams!

There is no fee for this payment suspension or 0% interest period—not from the federal government and not from your loan servicer. If someone asks for money for either of those reasons, it’s a scam. Your loan servicer provides free help with your questions or concerns about your loan payments. There is no coronavirus-related loan forgiveness for federal student loans. Learn about avoiding student aid scams.

5. If You’re Struggling Financially, You Have Multiple Payment Options When Payments Resume

If you are worried you won’t be able to make your next payment after the payment suspension ends, you have options.

ED offers a variety of income-driven repayment (IDR) plans based on your income. Under an IDR plan, payments may be as low as $0 per month.

Check out StudentAid.gov’s Loan Simulator to learn how switching your repayment plan could impact your monthly payment amount before your next bill.

After understating all your repayment options, you can apply for a specific plan or ask to be placed on the repayment plan that results in the lowest monthly payment amount.

If you are already on an IDR plan but are currently unemployed because of the COVID-19 emergency, you can update (recertify) your information to see if you qualify for a new, lower payment amount by logging in and completing the steps below:

How To Apply to Lower Your Monthly Payments on an Income-Driven Repayment (IDR) Plan  1.Log in at StudentAid.gov/app/ibrinstructions.action. 2. Select “Update Income Info” and complete application. 3. After you apply, your federal loan servicer will notify you regarding your eligibility and, if you qualify, the new payment amount.  4. Your student loan payments will resume at the new amount when the administrative forbearance ends.  Note: To provide relief during the COVID-19 emergency, federal student loans were automatically placed in an administrative forbearance, temporarily allowing monthly loan payments to stop. Additionally, interest was temporarily set at 0% on federal student loans. Find more info and updates about the administrative forbearance period at StudentAid.gov/coronavirus.

Any changes to your payment amount will take effect after the payment suspension ends.

If none of these options seem beneficial to you, contact your loan servicer to discuss additional forbearance options after the payment suspension ends. However, please remember that interest accrues for most borrowers on a general forbearance.

Disclaimer: This article contains general statements of policy under the Administrative Procedure Act issued to advise the public on how ED and Federal Student Aid (FSA) propose to exercise their discretion as a result of and in response to the lawfully and duly declared COVID-19. ED and FSA do not intend for this article to create legally binding standards to determine any member of the public’s legal rights and obligations for which noncompliance may form an independent basis for action.