CARES ACT: The Impact on Student Loans

On Friday March 27^th, President Trump signed a $2 trillion financial stimulus known as the CARES Act. This immense package is designed at the federal level to help Americans who will be directly impacted by Covid-19 by providing aid to individuals, support to small business sectors, expanded provisions for health care, updated tax deadlines, and education provisions. Many individuals are still currently battling with substantial student loan payments. However, during these unprecedented times, the CARES act has adopted a few measures to help provide temporary relief.

Key Federal student loan provisions & how they will affect you:

• 6-month grace period on current Federal student loan payments till September 30^th
  • Note: this does not apply to private custodians (ex: Discover, Earnest, Sallie Mae)
    • If you have private loans, we still recommend reaching out to them to see if there are any options available, including forbearance
  • This legislation treats each month during the grace period as if a payment was made towards loan forgiveness
  • No interest will be compounded during the interim, applied to principal only
  • You must manually check your Federal custodial payment portal; this will not automatically change an autopay plan if you need to delay your payments
• Employers can exclude student loan repayments from compensation
  • Employers can contribute up to $5,250 annually toward an employee’s student loans and it is not included in the employee’s income (applies currently to only 2020), meaning it is not taxed
• Look for potential student loan refinancing
  • With recent cuts from the Federal Reserve, this can be a great opportunity to lock in a new rate and start saving on your monthly payments.
    • Need a credit score of at least 650 to qualify and have enough monthly income to make payments
  • If you are quoted rates that are higher than anticipated, look into having a cosigner such as a parent/guardian to see if you are granted a lower rate
• If you are a current student, contact your bursars/financial aid office at your educational institution to check to see if there have been any changes.

All of these recent provisions can be helpful ways to lower some financial burden on student loans. With the addition of the $1,200 stimulus check, aid to vulnerable economic sectors, Federal student loan relief, tax relief, and other various additions, the US government intends that the CARES Act can provide some stability in an unprecedented time of hardship. As history has shown, we are strong and are always capable of overcoming the toughest of challenges.