ED Directs Servicers to Implement COVID-19 Student Loan Relief by Next Week

By Joelle Fredman, NASFAA Staff Reporter

Updated 4/3/20 at 4:00 p.m. to clarify guidance from ED regarding loans currently in a grace period that are not yet in repayment.

As part of the third COVID-19 relief package signed into law by President Donald Trump on March 27, Congress mandated the Department of Education (ED) suspend payments and interest accrual on federally-held student loans until Sept. 30, 2020. As borrowers eagerly await evidence of those changes on their accounts, ED on Wednesday gave lenders a date by which they must implement those provisions and addressed questions on its website as to whether borrowers should already stop making payments.   

Before they could begin adjusting borrowers’ loan payments, servicers were awaiting formal guidance from ED as to how they should implement the changes included in the relief package, said Scott Buchanan, executive director of the Student Loan Servicing Alliance (SLSA). POLITICO reported ED provided those instructions to lenders on Wednesday, and stated they needed to implement the six-month forbearance and interest waiver by April 10.

“We’re hopeful this can be done pretty quickly,” Buchanan said. “[But] the scale of this is beyond anything that we’ve ever done before.”

According to the guidance, POLITICO reported, loan servicers will be required by the end of next week to apply the benefits of the COVID-19 relief package retroactively to March 13, and to turn off automatic payments for borrowers who have recurring ACH transfers. ED also wrote that loan servicers can apply the interest borrowers paid on their loans after March 13 to their principal balance, or that borrowers can request a refund for those payments from their lender. Additionally, ED wrote that loan servicers must report all suspended payments as on-time payments to credit bureaus, so as to not negatively impact a borrower’s credit report.  

Navient posted a message on its website following ED’s guidance that it is working to suspend payments by April 10, adding that once eligible loans have been updated, Navient will notify borrowers in writing. Navient spokesperson Paul Hartwick told NASFAA in an email that the company has already seen many borrowers suspend their payments for 60 days after Trump announced an option for borrowers to request to be put into administrative forbearance earlier last month.

“Borrowers who made a payment on or after March 13 and want that payment refunded, or those who have questions about autopayments (or anything else related to their accounts) should contact us,” Hartwick said. 

Late Wednesday evening, ED also updated its COVID-19 information web page with new guidance for borrowers questioning whether to stop making loan payments before changes are officially implemented. In response to a question about what will happen to auto-payments if a borrower takes no action, ED wrote that any auto-payments processed between March 13 and September 30 can be refunded upon request to loan servicers. 

One outstanding question was whether the legislation will apply to the loans of students who recently graduated and have not entered into repayment. Based on the instructions servicers received from ED, Trump's announcement to waive interest on all federally-held loans starting March 13, 2020, including loans for borrowers in school and in their grace period, is not to be altered by the CARES Act, except that it is to end Sept. 30, 2020.

While loan servicers work to implement the changes, other recent provisions from ED are already in motion.

Earlier this month, ED announced it has stopped requests to withhold the wages, tax refunds, and Social Security benefits of borrowers who are in default on their federal student loans for at least the next 60 days as a means of relief during the global crisis, and has directed private collection agencies to stop pursuing defaulted borrowers.

Following that announcement, Ascendium, the nation’s largest student loan guarantor, confirmed it has stopped its collections and messages to borrowers, and that it is refunding borrowers for money collected since March 13, Inside Higher Ed reported.

For more information and resources on how the spread of the novel coronavirus is impacting student financial aid, please refer to NASFAA's COVID-19 Web Center.


Publication Date: 4/3/2020

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