The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), a $2 trillion stimulus bill enacted in response to the ongoing coronavirus (“COVID-19”) pandemic, contains numerous provisions impacting federal student loans for the next six months. Considering how the amount of outstanding student loan debt is in excess of $1.5 billion, and much of that debt is from federal loans, these provisions will affect a significant number of borrowers and companies involved in the student loan industry.

Some of the key provisions, intended to provide relief to student loan borrowers impacted by the COVID-19 pandemic, are found in sections 3503-3508 and 3513:

  1. All student loan payments on federally-held student loans (not private loans or commercially-held Federal Family Education Loan Program loans) are suspended (not due) until after September 30, 2020, and all interest is waived and set at 0% through this same period (Section 3513). This expands on the Trump administration’s earlier announcements, in mid-March, that payments could be suspended and interest waived, at a borrower’s election, for a shorter two-month period.
  2. Affirmative collection of federal student loan debt is suspended until September 30, 2020, including all lawsuits seeking judgments and post-judgment collection activities, including garnishments (Section 3513).
  3. Payments which are not made during the suspension period – from now until September 30, 2020 – must not be reported to consumer reporting agencies as missed payments (Section 3513). Instead, they must be treated as if they were regularly scheduled payments made by borrowers; thus, such loans should not be reported to indicate there is a forbearance. Read in conjunction with Section 4021 of the CARES Act – which amends the Fair Credit Reporting Act in response to COVID-19, as discussed here – any student loan creditor or servicer who has entered into pandemic-related deferrals and forbearance agreements since January 31, 2020, will have to report the accounts as “current” until September 30, 2020.
  4. Participants in certain loan forgiveness and rehabilitation programs who elect not to make loan payments during the suspension period (i.e., now until September 30, 2020) still will be able to count any missed payments during the suspension period towards the total monthly payments required to take advantage of the program (Section 3513).
  5. Students participating in a federal work-study program may receive wages even if they are unable to work (Section 3505).
  6. Students who are unable to complete full semesters due to a qualifying emergency – including those related to the COVID-19 pandemic – are now eligible for certain accommodations (Section 3507). For example, Stafford loans or Pell grants received for an incomplete semester will not count towards the total number of loans or grants that a student is eligible to receive. As another example, a student who has to withdraw from school due to a qualifying emergency may be eligible for loan cancellation.
  7. Employers can now pay up to $5,250 of an employee’s student loan (principal and interest) as a benefit to the employee, tax-free (Section 2206).

In sum, the CARES Act represents one of the most significant offers of debt relief to student loan borrowers in modern times, illustrating an ongoing concern – on both sides of the congressional aisle – with the impact of the pandemic on the sheer quantity of student loan debt in the United States.