There is no doubt the coronavirus pandemic has impacted everything in your daily life. Today we are going to look at the impact of Covid-19 on your federal student loans owned by the Department of Education. Keep in mind these are different than privately held student loans.
Currently, your Department of Education student loan payments are suspended and you are not required to make payments. Unless extended, this suspension of payments is scheduled to end on December 31, 2020. In addition, if you made a payment after March 13, 2020, you can request a refund of that payment without any penalty.
You may wonder if your failure to make payments will negatively impact your credit score during this period and the answer is no. Student loan servicers were required to report to credit reporting agencies as if you made your regularly scheduled payment. Therefore, there should be no delinquency being reported during this time. If you check your credit report and find this is not happening you need to contact the servicer and start a dispute with the credit reporting agency.
In contrast to general forbearance, this payment suspension does not need to be requested and should have happened automatically. It also differs in that the interest rate will be set to zero so it will not accrue and it will also not be capitalized during this time period. Therefore, if you are able to make payments it will go directly toward the principal owed. This would allow you to pay off the loan faster and reduce the total amount paid on your student loans. If taken advantage of, this could save you thousands of dollars on your Department of Education student loans.