Learn how to navigate CARES Act changes in the best way possible.
If you have existing federal student loans, the upcoming expiration of the CARES Act student loan relief could impact your finances in a big way. This overview will help you understand what is happening with the CARES Act, and what steps you can take today to put yourself on the best path possible.
What is the CARES Act?
Standing for Coronavirus Aid, Relief, and Economic Security (CARES), the CARES Act is an economic relief package passed by Congress in March of 2020. It included a wide range of policies designed to help people and businesses that were struggling financially as a result of the Coronavirus pandemic.
How did the CARES Act impact student loans?
While the CARES Act included a handful of policies that affected student loans, the most significant was a portion of the law that allowed student loan borrowers to temporarily pause payments on federally held student loans without penalty. It also temporarily reduced interest rates on all federally-owned student loans to 0%. This means millions of borrowers have been able to postpone student loan payments since March 2020 without added interest, financial penalties, or a negative credit impact. This was designed to help borrowers who were struggling financially during the pandemic.
What’s changing with the CARES Act now?
Federally-held student loans have a suspension of payments and a temporary interest rate of 0% until the U.S. Department of Education is permitted to implement the debt relief program or the litigation is resolved. Payments will restart 60 days later. If the debt relief program has not been implemented and the litigation has not been resolved by June 30, 2023 – payments will resume 60 days after that. We will notify borrowers before payments restart. If you refinance these loans, you will no longer qualify for this relief or other federally-held loan benefits. Carefully consider your options before refinancing federally-held loans.
What can I do now to make this change easier?
Most borrowers have two options for how they can make this transition easier.
- If you’re employed (or generally have the financial capacity to make payments) refinancing your student loans before payments restart could be a smart idea. Depending on your current rate, there’s a good chance you could lower your monthly payment significantly and potentially save a lot of money over the life of your loan. This could lead to thousands of dollars of total savings over time.*
- If you’re still unemployed or struggling financially, you may be able to qualify for additional relief in the form of an income-driven repayment plan or temporary relief programs like deferments or forbearances. Learn more about these options from the U.S. Department of Education.
Regardless of your situation, making smart decisions could improve your outlook in a major way. So before the CARES Act student loan relief expires, make a forward-thinking plan for your student loan repayment.
A Note About Student Loan Refinancing
Understand and evaluate the various features and benefits of your current loans, and any potential benefits that may be lost by refinancing federal and private education loans, such as the loss of any remaining grace periods. Learn more about what to take into consideration when refinancing federal student loans with private education loans.
*Your actual savings, if any, may vary based on interest rates, balances, remaining repayment terms and other factors. Refinancing to a longer term may lower your monthly payments, but may also increase the total interest paid over the life of the loan. Refinancing to a shorter term may increase your monthly payments, but may lower the total interest paid over the life of the loan.