What About Student Loans?

Consumer Finance Expert Attorney Amanda Adrian Answers Our Questions

May 01, 2020

9:13 a.m.

Financial worries have not gone away during this stressful time when we’re concerned about our health. The Shepherd Express is launching a new series about protecting you, the consumer. Attorney Amanda Adrian, a Milwaukee consumer law expert, will explain the new consumer-friendly laws that have been passed in response to the corona virus pandemic. The first installment covers what you need to know about student loan relief.

Corona Days Consumer Guide: Part 1, Student Loans

Sadly, this article does not refer to the tasty Mexican beer, but rather the global pandemic that threatens to drown millions of newly unemployed Americans in a sea of debt. In response to the COVID-19 crisis, both the Wisconsin and federal governments have made changes to consumer law designed to help people stay afloat. This series aims to alert you to these new laws and explain how to use them to keep your financial house in order until things get back to normal or, at least, aren’t quite so bad. Let’s start with student loans.

Figuring it Out

If you’re not sure if or how you might benefit from the CARES Act, you’ll need to figure out what type of federal student loans you have and if they’re in default. Here’s how:

• Go to the U.S. Dept. of Education website, (if you don’t have an account, you can quickly and easily create one).
• After logging in, you’ll see the Student Aid Dashboard with a box titled “My Aid.” In that box, click “View Details” and scroll down to “Loan Breakdown,” where your loans are grouped by servicer.
• For every servicer showing an unpaid balance, click on “View Loan Details” to see a list of loans serviced by this servicer.
• For each loan with an unpaid balance, click on “View Loan Details,” and look at the top for “Loan Type.” Here it will state Direct Loan/DL, FFEL/FFELP, or Perkins. If your FFEL/FFELP loan is owned by ED, it will also say “USED” or “DRG” (Default Resolution Group). If you have a Perkins loan, contact your school to ask who owns it.

Finally, check the “Loan Status” heading so see if the loan is in default.

• If you’re still confused about your loans and whether they’re covered under the CARES Act, contact your loan servicer.

While Wisconsin’s government has not done anything help those of us with student loans, the federal government has passed the CARES Act. For covered loans, the Act provides benefits lasting approximately 6 months, until Sep. 30, 2020. The primary benefits are: (1) suspending monthly payments; (2) reducing interest rates to 0%; and (3) stopping all debt collection activity (e.g., wage garnishment, Social Security and tax refund offsets, and debt collector calls and letters). And the benefits are automatically applied to all covered loans. So can you stop paying your student loans until October? The answer is…maybe. Whether the CARES Act covers your particular student loans depends on what types of loans you have.

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What Loans Does The CARES Act Cover?

The first thing to know about the CARES Act is that it only covers federal loans, not private loans. So keep paying your private student loans if you can. If you have private loans you can’t pay, contact your loan servicer to ask for help, such as temporarily stopping or reducing payments. If you’re not sure whether your loans are private or federal, try checking studentaid.gov and studentloanborrowerassistance.org for guidance.

So can you just stop paying all of your federal student loans? Again, the answer is maybe. The CARES Act does not cover all federal loans—only those that are owned by the U.S. Department of Education (“ED”). The universe of federal student loans includes: (1) Direct loans; (2) FFEL/FFELP (“Federal Family Education Loan”) loans; and (3) Perkins loans. Direct loans mean money borrowed directly from ED, therefore ED owns the loans and they qualify for CARES Act relief. But FFEL and Perkins loans were borrowed from entities other than ED (for FFEL, from a bank, credit union, or guarantee agency; for Perkins, from your school), and therefore ED does not own most of these loans. FFEL and Perkins loans are covered only if ownership was transferred to ED, usually due to borrower default.

What Else?

Well, the CARES Act provides different benefits based on loan type (Direct, FFEL, or Perkins) and “default” status. (Default usually means you are at least 9 months behind on your payments.) Broadly speaking, the 0% interest rate and ban on collection activity apply to all loans covered by the Act. Whereas the 6-month pause in payments applies only to Direct and covered Perkins loans not in default. Also, if you’re enrolled in Public Service Loan Forgiveness (“PSLF”) or Income-Driven Repayment (“IDR”) forgiveness, the 6-month payment pause counts toward your 120 months even if you don’t make payments. And if your loan is in rehabilitation, rehabilitation payments are also suspended until October. Remember that these benefits will be automatically applied to all eligible loans—you do not need to ask for them or opt-in.

Finally, the federal government may expand student loan borrower relief to more (hopefully all) student loans. So keep an eye on the news and check studentaid.gov and studentloanborrowerassistance.org for updates. Up next in this series: foreclosures, evictions, and mortgage loan forbearance. Now for that beer…

Attorney Amanda Adrian owns Adrian Consumer Law, LLC, a Milwaukee-based consumer rights law firm specializing in student loans, foreclosure defense, credit reporting errors, and debt collection defense. She is also launching a new summer workshop, “Student Loan 411-911,” to help people better understand and manage their student loans. You can find her at www.adrianconsumerlaw.com.