This article is part of our series on the coronavirus stimulus bill. You can find our guide to direct payments here.

With balances surpassing $1.6 trillion, student loans have become a hot button political issue in recent years. In response to the ongoing coronavirus pandemic, the federal government has granted borrowers some much needed relief. On March 20, the Department of Education announced provisions that were further expanded by the CARES Act stimulus package. Here’s what you need to know.

The major changes:

Through September 30, borrowers do not need to make payments on their federally held student loans. No interest will accrue on your loans during this period, either.

The suspension is not mandatory: if you’d like, you can continue making payments on your loans. Either way, the amount you owe each month will not change.

Additionally, if your employer helps pay your student loans as an employee benefit, the CARES Act will waive taxes on employer contributions up to $5,250 this year. A borrower receiving these benefits should discuss the change with their employer.

Despite proposals from Democrats, the CARES Act stimulus package does not provide any student loan forgiveness.

Which loans are eligible?

The suspension on payments applies only to student loans owned by the federal government. So, all Direct Loans are eligible. These provisions should apply automatically, so there’s no need to sign up or opt-in. 

Some older Federal Family Education Loans, however, are not included. If you owe these, check with your loan servicer to see whether your payments are suspended, as well.

Perkins Loans, loans from state agencies, and loans from private lenders do not qualify for suspension under the CARES Act. Borrowers of these types of loans should check to see if their holders are offering any payment assistance programs.

What about my loan forgiveness program? 

Borrowers who choose to take advantage of the sixth-month payment suspension will not be penalized by any loan forgiveness or rehabilitation program in which they are enrolled. For example, if your public service loan forgiveness program requires that you make payments for 120 consecutive months to remain eligible, the monthly counter will still increase during the suspension regardless of whether you actually make payments. The same protection applies to borrowers with income-driven repayment plans.

How will this affect me if I’m already behind on my loan payments?

Involuntary collection efforts for overdue payments—such as wage garnishments, the seizure of tax refunds, or the reduction of other benefit payments—will also be suspended until September 30. Again, interest won’t accrue during this period either.

Is now a good time to refinance my loans?

Now may be an excellent time for you to refinance your student loans. Thanks to recent cuts in interest rates, refinancing rates are likely to hit historic lows. Borrowers with secure financial situations should explore their refinancing options in order to maximize their savings.

Are more changes on the way?

Leaders in government have so far asserted their willingness to continue to provide Americans relief through the coronavirus crisis. Though the CARES Act itself does not include any loan forgiveness for borrowers, Democrats in Congress had proposed loan forgiveness plans during negotiations of the stimulus package. It’s possible that these proposals could make their way into future legislation.

Final thoughts

It’s important to remember that the government will not be paying down your loans during the six-month suspension period. After September 30, you’ll still be responsible for your full loan balance. Be mindful of this date, and remember that economic circumstances during the coronavirus pandemic are changing rapidly. Your financial situation may be different in six months.

Student loans offer millions of Americans the opportunity to pursue higher education, but repayment can become a burden. If you’re struggling with debt, or just looking for new ways to optimize your personal finances, Debtly can help. Debtly allows its users to easily track their debt and make secure payments—all in one place. Check out our website!