Student loan forgiveness is a complex topic that many borrowers do not consider when paying down their student debt. In fact, there are a few programs sponsored by the federal government that can help with student loan forgiveness. The CARES Act offers some resources for federal student loan borrowers.

The CARES Act was enacted in 2020 during the COVID-19 pandemic and offers financial relief for federal student loan borrowers. Several factors determine how you can take advantage of this, including whether you have private student loans or federally subsidized loans. Either way, it is worth learning more about the CARES Act to see if there is a student loan forgiveness program available to you as you re-evaluate your repayment options.

What the CARES Act Means for Student Loan Forgiveness

If you have federal loans, the CARES Act may help alleviate your student loan debt. 

Here are a few ways it might help you:

  • Student loan payments are paused through August 31, 2022.
  • Companies can pay up to $5,250 of an employee’s student loan payments tax-free.
  • Teachers with less than five consecutive years of teaching in a low-income school can now benefit from the Teacher Loan Forgiveness Program.

On top of that, the U.S. Department of Education waived wage garnishment for defaulted federal student loans after March 13, 2020.

These many changes could directly affect your student loan repayment plan. It is worth taking a look at your loans to make sure you take advantage of opportunities to restructure your repayment plans.

How the CARES Act Affects Your Student Loan Repayment Plan

The CARES Act was passed by the federal government in 2020 to provide financial relief in the middle of the Covid-19 pandemic. It covered many areas to alleviate individual financial burdens, including federal student aid relief. 

As part of the CARES Act, the U.S. Department of Education paused student loan payments and the accrual of interest on your federal student loan balance. When it was originally passed in March of 2020, the student loan relief was scheduled to end in September of 2020. However, the Biden administration recently extended the deadline to August 31, 2022.

While this offered relief to many federal student loan borrowers during the pandemic, it also extended the length of their repayment plans.

Even though the CARES Act has been extended, it might be a good idea for borrowers to start planning for payments to resume after August 31, 2022. There are a few options to find student loan debt relief aside from loan forgiveness programs:

  • Student loan forbearance: Loan forbearance is when your monthly loan payments are paused for a certain period of time. However, interest will continue to accrue on your loans while in the forbearance period. Forbearance applies to both subsidized and unsubsidized loans.
  • Deferment: Loan deferment also means that your monthly payments are paused for a certain period of time. Subsidized loans will not accrue interest during the deferment period. However, unsubsidized (or private) loans will continue to accrue interest during deferment.
  • Refinancing: Refinancing your loan allows you to potentially obtain a lower interest rate or different monthly payments . This is a great option if you want to potentially save money while repaying your loan. However, your loan servicer may change once you refinance your student loans. When the CARES Act expires on August 31, 2022, many borrowers will face repayment plans they haven’t considered in years. Unfortunately, missing student loan payments may cause your loans to fall into delinquency which could negatively affect your credit report and potentially make it more difficult to secure a new loan in the future. That is why it is important to manage your repayment options properly.

Student Loan Forgiveness Programs Offered Outside of the CARES Act

The CARES Act is not the only option for managing your student loan debt. The U.S. Department of Education offers a variety of federal student loan forgiveness options to help with student loan relief independent of the CARES Act.

Before diving into federal student loan forgiveness programs, remember that only federal loans qualify. Private student loan borrowers may need to work with their lender or loan servicer to find a plan to help manage student loan debt. 
For federal student loans, there are a number of student loan forgiveness programs, including:

  • Public Service Loan Forgiveness Program (PSLF)
  • Teacher Loan Forgiveness Program
  • Perkins Loan Forgiveness Program
  • These loan forgiveness programs have various eligibility requirements. They also require you to apply. You can find more details on studentaid.gov.

    Public Service Loan Forgiveness Program

    The Public Service Loan Forgiveness Program (also known as the PSLF) is available for government and non-profit employees. In order to qualify for this program, you need to have made 120 qualifying payments to your student loan servicer while working full-time for a qualifying employer.

    The PSLF was designed to benefit those providing a public service to their community. Typically, it applies only to federal direct loans. That said, some recent changes offer temporary student loan relief to more borrowers. The CARES Act allows borrowers to consolidate their FFEL, Perkins, or non-direct loans before October 31, 2022, in order to qualify. Additionally, military service members and federal employees using data matches will automatically receive a PSLF credit until October 31, 2022.

    Teacher Loan Forgiveness Program

    The Teacher Loan Forgiveness Program provides student loan relief to teachers working in low-income schools. Unlike the PSLF, this student loan forgiveness program applies to both direct and FFEL loans for teachers or current students who previously taught in qualifying schools.

    The program offers qualifying borrowers up to $17,500 in student loan forgiveness if they work in a qualifying low-income school consecutively for five or more years. If you are a qualified borrower, apply for the Teacher Loan Forgiveness Program on StudentAid.gov.

    Perkins Loan Forgiveness Program

    The Perkins Loan Forgiveness Program is exclusively available for federal Perkins Loans. If you have Perkins Loans, the Perkins Loans Forgiveness Program can potentially cancel all or a portion of your loans.

    Eligibility for the forgiveness program is generally decided based on your employment history, volunteer service, and current income. If you think you may be eligible, reach out to your lender or loan servicer to find out more about the qualifications for the Perkins Loans Forgiveness Program.

    Frequently Asked Questions (FAQs)

    When does the federal student loan payment pause stop?

    The federal student loan payment pause provided by the CARES Act has been extended through August 31, 2022. After that, normal monthly payments are expected to resume. 

    Will refinancing my student loans help lower my interest rate?

    Refinancing your student loans may help you find a lower interest rate overall. It may also help lower your monthly payments. While student loan debt can feel overwhelming, you have many options available to make it more manageable for your lifestyle and budget.