By: Janine Danks Fox
Congress has enacted numerous emergency measures to ensure that college and graduate students are not burdened with Federal student loan payments, accrual of interest on federal loans, or collection efforts for loan delinquencies during the COVID-19 emergency. The CARES Act also grants Higher Education Institutions the ability to provide emergency financial aid relief to eligible student loan borrowers to defray their expenses.
Federal student aid is paid by the federal government – specifically, the U.S. Department of Education. The purpose of the aid is to assist students to pay for education expenses at a post-secondary school (e.g., college, vocational school, graduate school). Federal student aid funds which are used for qualifying expenses, such as tuition and fees, room and board, books and supplies, computers, transportation and certain dependent care are addressed by the CARE Act. The four categories of federal student aid are:
- Grants – money that usually doesn’t have to be repaid. Most U.S. Department of Education grants are based on the student’s financial need.
- Scholarship – U.S. Department of Education scholarship money is awarded based on a student’s academic achievement and does not have to be repaid.
- Work Study – Money earned by a student through a job on or near campus while attending school and does not have to be repaid.
- Loan – money advanced to the student which must be repaid with interest.
These are the key provisions of the CARES ACT that will provide you with emergency financial relief during the COVID-19 crisis:
- Relief On Existing Loans
-
- Voluntary election for federal student loan borrowers to suspend payment on federal student loans until September 30, 2020, without penalty to your credit or risk of non-payment being reported to a credit bureau. Regardless of your election to suspend or continue your federal student loan payments, interest on your federal student loan payments will be suspended through September 30, 2020. During the period of suspension for federal student loan payments, the student will be treated as if timely payments were made for purposes of any student loan forgiveness programs, including public service loan forgiveness. Debt collection is suspended for student loan borrowers who have defaulted on their federal student loans.
- Continued Emergency Financial Aid To Defray Student Expenses
- Permits Higher Education Institutions to release Pell Grants to Federal student loan borrowers up to the maximum amount for the applicable award year while relaxing the rules to conduct needs based calculations. Permits the continuation of work study payments for those students that were granted a work study award but who were precluded from fulfilling their work study obligations due to COVID-19 protocols.
It is important to highlight that the above referenced emergency relief only applies to Federal Student Aid/Loans. If you are repaying federal student loans that were consolidated with private loan institutions such as SoFi, Sallie Mae, Nelnet, Navient, or your local bank those financial institutions are not required to provide emergency financial relief, other than the traditional programs available through your consolidation agreement, in the event of financial hardship such as forbearance or deferment options. If you have consolidated your loans through a private institution, you may wish to contact that institution to discuss particular relief provisions which the institution is offering to deal with your particular hardship; most have enacted specific policies you may find helpful.
Janine Danks Fox is a family law attorney and partner in the Lawrenceville, NJ law firm of Szaferman, Lakind. She can be reached at 609-275-0400 or via email at jfox@szaferman.com.
For more COVID-19 related resources and articles visit our COVID-19 Resource Center.
The foregoing is intended for general information purposes and is no substitute for specific legal advice.
