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CARES Act and PSLF

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  • CARES Act and PSLF

    The CARES Act just passed the Senate. Obviously needs to pass the House and get signed into law, but just seeing if others would interpret this the same way I am. See text below. For those going for PSLF, would this mean payments would be suspended until 9/30/20, yet we still get credit for them - i.e. 6 months of no payments, but 6 more months still count toward PSLF?

    Here's the text:

    SEC. 3513. TEMPORARY RELIEF FOR FEDERAL STUDENT LOAN BORROWERS.

    (a) IN GENERAL.—The Secretary shall suspend all payments due for loans made under part D and part B (that are held by the Department of Education) of title IV of the Higher Education Act of 1965 (20 U.S.C. 1087a et seq.; 1071 et seq.) through September 30, 2020.
    (b) NO ACCRUAL OF INTEREST.—Notwithstanding any other provision of the Higher Education Act of 1965 (20 U.S.C. 1001 et seq.), interest shall not accrue on a loan described under subsection (a) for which payment was suspended for the period of the suspension.
    (c) CONSIDERATION OF PAYMENTS.—Notwithstanding any other provision of the Higher Education Act of 1965 (20 U.S.C. 1001 et seq.), the Secretary shall deem each month for which a loan payment was suspended under this section as if the borrower of the loan had made a payment for the purpose of any loan forgiveness program or loan rehabilitation program authorized under part D or B of title IV of the Higher Education Act of 1965 (20 U.S.C. 1087a et seq.; 1071 et seq.) for which the borrower would have otherwise qualified.
    (d) REPORTING TO CONSUMER REPORTING AGENCIES.—During the period in which the Secretary suspends payments on a loan under subsection (a), the Secretary 22 shall ensure that, for the purpose of reporting information about the loan to a consumer reporting agency, any payment that has been suspended is treated as if it were a regularly scheduled payment made by a borrower.
    ...

    Full text of the bill here: https://assets.documentcloud.org/doc...-CARES-ACT.pdf

  • #2
    That was my assessment, but it seems too good to be true? There are two possible scenarios I think. This first is based on what is stated at myfedloan.com, the second is based on the language above:

    1. You can request emergency forbearance, will have no payments due for 6 months, no interest will accrue, but the 6 months will NOT count toward PSLF (based on what is stated at myfedloan.com as of right now). Everyone else not in forbearance still pays like normal, but since no interest is accruing your payments will go only toward principal and previously unpaid interest.

    2. Everyone gets put into 6-month forbearance automatically, no payments for 6 months, no interest, and these 6 months will be see as "PAID" for PSLF purposes. This is obviously the better option for those who wouldn't necessarily need emergency forbearance and who don't want to delay PSLF by 6 months, but still could use the extra cash flow to help out right now.

    For me personally this would result in $2000+/month of extra cash flow for 6 months, which would help us pay our nanny (she really needs the employment) and help out some family who are having a hard time with this situation.

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    • #3
      Fed Loan is already incompetent at calculating payments....

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      • #4
        I'm not sure how long that has been on fedloan, but I'm guessing they wouldn't add anything until the bill is passed into law. I think that may have been related to a prior executive order.

        Forbes seems to agree with scenario #2: https://www.forbes.com/sites/zackfri.../#9615b255f857

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        • #5
          https://www.reddit.com/r/StudentLoan...elief_package/
          Changing by the day and not set in stone, but the top resource in my mind on this stuff in the world is Betsy Mayotte, who is a very active redditor and President of a student loan advisory non-profit. If she says “no interest, no payments and it counts towards PSLF” (which she does), then it is so!

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          • #6
            How about as an insurance policy, we pay $1 a month for the next 6 months? Just so there is a "payment" registered during these months.

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            • #7
              It appears that a number of folks are suggesting turning off auto pay as well if you are looking to take advantage of this part of the stimulus (if you don’t payments will continue and while interest doesn’t accrue, you don’t get the benefit of the zero payment qualified pslf). DONT DO THIS YET since it’s not passed or in effect, but keep an eye on this in coming weeks.

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              • #8
                Originally posted by East coast View Post
                It appears that a number of folks are suggesting turning off auto pay as well if you are looking to take advantage of this part of the stimulus (if you don’t payments will continue and while interest doesn’t accrue, you don’t get the benefit of the zero payment qualified pslf). DONT DO THIS YET since it’s not passed or in effect, but keep an eye on this in coming weeks.
                Agreed. It sounds like the forbearance could be automatic, so stopping payments manually may be unnecessary.

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                • #9
                  Nice overview here:

                  https://www.forbes.com/sites/zackfri...s-coronavirus/

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                  • #10
                    Originally posted by ID Doc View Post
                    “Skipping payments counts for Public Service Loan Forgiveness

                    The Public Service Loan Forgiveness program requires 120 monthly student loan payments, although the payments do not have to be consecutive. If you are pursuing public service loan forgiveness, and decide to skip payments through September 30, 2020, the skipped payments will count toward toward the required 120 monthly payments.”


                    this has MAJOR ramifications for those pursuing PSLF. Does anyone have more primary source or even the page of the bill to read? I would hate to make a major financial decision based on an online financial article.

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                    • #11
                      Found this tonight on nytimes.com. Looks promising but still isn't full text.

                      https://www.nytimes.com/article/coro...il&login=email
                      Student Loans

                      The federal government has already waived two months of payments and interest for many federal student loan borrowers. Is there a bigger break now with the new bill?
                      Yes. Until Sept. 30, there will be automatic payment suspensions for any student loan held by the federal government. It is hard to contact many of the loan servicers right now, so check your account online in the coming weeks. Once you are logged in, look for the current amount due. There, you should be able to see if the servicer has reset its billing systems so that you are showing no payment due.
                      How do I know if my loan is eligible?
                      If you’ve borrowed money from the federal government — a so-called direct loan — in the past 10 years, you’re definitely eligible. According to the Institute for College Access & Success, 90 percent of loans (in dollar terms) will be eligible.
                      Older Federal Family Educational Loans (F.F.E.L.) that the U.S. Department of Education does not own are not eligible, nor are Perkins loans, loans from state agencies, or loans from private lenders like Discover, Sallie Mae and Wells Fargo. The holders of all those kinds of loans may be offering their own assistance programs

                      Continue reading the main story Within a few weeks, you are supposed to receive notice indicating what has happened with your federal loans. You can choose to keep paying down your principal if you want. Then, after Aug. 1, you should get multiple notices letting you know about the cessation of the suspension period and that you may be eligible to enroll in an income-driven repayment plan.
                      Will my loan servicer charge me interest during the six-month period?
                      The bill says that interest “shall not accrue” on the loan during the suspension period.
                      At the end of the suspension, keep a close eye on what your loan servicer does (or does not do) to put you back into your previous repayment mode. Servicer errors are common.
                      Will the six-month suspension cost me money, since I’m trying to qualify for the public service loan forgiveness program by making 120 monthly payments?
                      No. The legislation says that your payment count will still go up by one payment each month during the six-month suspension, even though you will not actually be making any payments. This is true for all forgiveness or loan-rehabilitation programs.


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                      • #12
                        All my loans are now showing 0% interest rate. My loan balance went down a small amount so I’m assuming it was retroactively applied. It does show i have a regular payment scheduled as usual in a couple weeks. This is on myfedloan

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                        • #13
                          This seems REALLY risky to me. As incompetent as FedLoan is, the risk of them not counting these six months or retroactively stating "no, PSLF actually didn't qualify for this" seems way higher than the chance that I can truly not pay on them for 6 months and have them count as paid. I just feel bureaucratic red-tape will overcome any Forbes or NYTimes article, or even a congressional law TBH. Is that naive? I think given FedLoan's track record it's not...

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                          • #14
                            Originally posted by SwitchPool View Post
                            All my loans are now showing 0% interest rate. My loan balance went down a small amount so I’m assuming it was retroactively applied. It does show i have a regular payment scheduled as usual in a couple weeks. This is on myfedloan
                            found the same regarding interest rate on mine today, too, except mine also says I don't have any payment due. seems miraculous that myfedloan has already changed that.

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                            • #15
                              This bill passed Friday and people here are already micro analyzing Fedloans’ website and jumping to conclusions when they are notoriously slow to respond or update. The language in the bill is not at all ambiguous.

                              Do you really think Fedloan will have a hard time counting payments when everyone in a forgiveness program is supposed to get these 6 payments on the house? Seems pretty simple to me.

                              To those who seem very anxious, how low does the risk have to be when the upside is six free payments?

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