Americans with Student Loans
This page will be updated continuously to reflect the most recent information. This page was last updated on May 20, 2021.
*** WHAT IS NEW IN THE AMERICAN RESCUE PLAN ***
The American Rescue Plan provides for more than $39 billion for colleges and universities. At least half of the funds received by colleges and universities must be used for direct financial assistance to students. Details are below.
In addition to the American Rescue Plan, you may be eligible for ongoing relief provided by the Families First Coronavirus Response Act (“Families First”), the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the Coronavirus Response and Relief Supplemental Appropriations Act of 2021 (COVID relief law), and executive action taken by President Biden.
The CARES Act and the COVID relief law provided assistance to K-12 schools, teachers, higher education institutions, college students, and student loan borrowers. The American Rescue Plan ensures that all COVID-19 student loan relief is tax-free.
Tax-Free Status for Student Loan Forgiveness
The American Rescue Plan requires that all COVID-19 student loan relief received between January 1, 2021 and December 31, 2025 be tax-free. For example, if an individual’s income-driven repayment plan becomes eligible for loan forgiveness during that time period, the amount of the loan that is discharged will NOT be included in the calculation of that individual’s gross income. Only borrowers who have been repaying their federal student loans in Income-Contingent Repayment (ICR) will qualify for forgiveness before the December 31, 2025 expiration of the tax-free status. Borrowers in ICR with just undergraduate loans may switch into the Revised Pay-As-You-Earn (REPAYE) repayment plan to qualify for loan forgiveness after 20 years instead of 25 years. More than 100,000 borrowers should qualify.
Employers may be able to use the tax-free status to provide employees with more tax-free student loan repayment assistance. You may find more information here.
Higher Education Emergency Relief Fund (HEERF)
The American Rescue Plan provides colleges and universities with nearly $40 billion in assistance through the Higher Education Emergency Relief Fund (HEERF). At least $20 billion of this HEERF funding must be used by colleges and universities for emergency financial aid grants to students, including students solely enrolled in distance education programs). Such grants may be used for any component of the student’s cost of attendance or for emergency costs that arise due to COVID-19, such as tuition, food, housing, health care (including mental health care) or child care. In making financial aid grants to students, colleges and universities must prioritize grants to students with exceptional need, such as students who receive Pell Grants. The U.S. Department of Education provided guidance to colleges and universities about this additional assistance, along with eligibility and administrative guidelines. More information is available from an institution of higher education’s financial aid office and from the U.S. Department of Education here. This relief follows $14 billion in HEERF funding from the CARES Act and $23 billion from the CRRSA Act.
Federal Student Loan Payments
On his first day in office, President Joe Biden signed a presidential memorandum that extended the student loan relief provisions authorized under the CARES Act. This means if an individual has a federal student loan—Direct or Federal Family Education Loan (FFEL) program loans held by the U.S. Department of Education—all payments are suspended through September 30, 2021, and borrowers will not accumulate interest during that time.
Unfortunately, borrowers with commercially-held FFEL, school-held Perkins Loans, or Public Health Service Act loans are not automatically eligible for this forbearance. However, if you have this type of federal loan, you can generally consolidate such loan into a Direct Loan to obtain the freeze on payments or interest.
Borrowers should have received notification that their loan payments are put on hold. When regular student loan payments resume, the U.S. Department of Education will notify student loan borrowers to inform them. These notices are intended to provide a transition period to help borrowers stay on track as regular loan payments begin again and to enroll in other relief options (such as income-driven repayment) at such time.
On March 30, 2021 the U.S. Department of Education announced an expansion of the pause on federal student loan interest and collections to all defaulted loans in the Federal Family Education Loan (FFEL) Program. This action will help more than one million additional borrowers burdened by debt during the COVID-19 emergency. The Department of Education expanded the 0% interest rate and pause of collections activity to 1.14 million borrowers who defaulted on a privately-held FFEL Program loan. This action will protect more than 800,000 borrowers who were at risk of having their federal tax refunds seized to repay a defaulted loan. This relief will be made retroactive to March 13, 2020, the start of the COVID-19 national emergency.
The Department will work to automatically return any tax refunds seized or wages garnished over the past year. Borrowers who made voluntary payments on any of these loans during the past year will have the option to request a refund of those amounts. The Department will also work with the guaranty agencies, who hold these defaulted FFEL Program loans, to implement the 0% interest rate for these borrowers.
In addition, any of these loans that went into default since March 13, 2020, will be returned to good standing. The guaranty agencies that hold those loans will assign them to the Department and request that the credit bureaus remove the record of default.
You may find more information on the Department of Education’s Coronavirus and forbearance information for students, borrowers, and parents here
Relief for Student Loan Borrowers with Disabilities during the COVID-19 Emergency
On March 29, 2021, the Department of Education announced relief for certain borrowers who have received student loan discharges due to total and permanent disability. These changes will ensure that:
Of the 41,000 borrowers who had $1.3 billion in loans reinstated will now get their discharges back, have any payments made during the COVID-19 emergency refunded and will not be asked to submit earnings documentation.
The other 190,000 borrowers who remain in their monitoring period will not be asked to submit earnings documentation. These income monitoring requirements will be waived for the duration of the COVID-19 emergency.
For more information, please visit StudentAid.gov/coronavirus.
Student Loan Collections
You are also protected against forced collections on federal student loans, such as garnishment of wages, tax refunds, and Social Security benefits, as well as negative credit reporting during this time period. More information on federal student loan payments and collections can be found here.
Student Loan Payments by Employers
If your employer provides a student loan repayment benefit, you can temporarily exclude up to $5,250 in these payments from your income. The $5,250 cap applies to both the new student loan repayment benefit as well as other educational assistance (e.g., tuition, fees, or books) provided by the employer under current law. The provision applies to any student loan payments made by an employer on behalf of an employee after March 27, 2020 and has been authorized through December 31, 2025 under the COVID relief law.
Continuing Education at Impacted Foreign Institutions
Foreign institutions may offer distance education or enter into written arrangements with U.S. colleges and universities to allow U.S. students attending foreign institutions to continue receiving student loans for the duration of the COVID-19 declaration of disaster. If you are attending a foreign institution, distance education programs may be offered for the length of the disaster and the following payment period, to ensure that students can maintain their federal student loans and complete their coursework before reverting back to in-person instruction. You may also complete part of your coursework at a U.S. institution of higher education with which your foreign institution establishes an arrangement that is approved by the U.S. Department of Education. This allows you to maintain both your federal student loans and your primary enrollment in your degree program with your original foreign institution, but gives you flexibility to take some coursework back in the U.S. if you need to return home. However, the CARES Act only allows this flexibility with U.S. institutions, and not other foreign institutions that are not already eligible for the federal student loan program.
Federal Work Study
College or university may issue payments as a lump sum or in payments similar to a paycheck to students who receive Federal Work Study and are unable to work due to work-place closures. Reach out to your financial aid office for more information.
Help for Students Who Cannot Complete the Semester
If a student must drop out of school because of the COVID-19 pandemic:
- The term does not count against them for the amount of subsidized federal loans and Pell Grants they are eligible for;
- They do not have to return unused Federal Student Loans or Pell Grants;
- The portion of the student’s loan taken out for the semester (or equivalent) is cancelled if a student withdrew due to COVID-19; and
- Grades will not impact students’ ability to meet federal academic requirements to receive Pell Grants or student loans.
More information can be found here.
Additional Resources for Federal Financial Aid Questions
Federal Student Aid
This federal agency can help answer questions about the type of loans a student holds and what kinds of relief are available.
Consumer Financial Protection Bureau
This federal agency can review complaints and help to navigate financial products like student loans.