If your student loans aren’t covered by the CARES Act, you may be losing out on important student loan benefits.
Here’s what you need to know – and what to do about it.
The CARES Act, which is the $2 trillion stimulus package meant to help Americans impacted by COVID-19, offers multiple benefits for your federal student loans. Among other benefits, federal student loans have been suspended, the interest rate on federal student loans has been set to 0%, and there’s no student loan debt collection on defaulted student loans. These benefits won’t last forever, however. They’re available from March 13, 2020 through September 30, 2020.
These student loans aren’t eligible
Importantly, not all federal student loans are eligible for these benefits. For example, there are approximately 12 million borrowers who hold Family Federal Education Loan Program loans (FFELP Loans). These student loans are backed by the federal government, but mostly were issued by private banks prior to 2010. Of the total FFELP loans outstanding, commercial lenders (e.g., not the federal government) hold approximately 6 million FFELP loans totaling $142 million. If you are borrower with a FFELP loan not owned by the federal government, it may be frustrating to learn that your FFELP loan won’t qualify for any of these benefits under the CARES Act. This means that you will need to make your monthly student loan payments for your FFELP loans. That can place you at a major financial disadvantage in the wake of the COVID-19 pandemic.
Direct Consolidation Loan
Fortunately, there is a simple solution if you have FFELP loans. You can consolidate your FFELP loans into a Direct Consolidation Loan. This consolidation is done through the federal government and your student loan servicer can help facilitate.