Student loans are treated differently depending on whether they are "federally connected" or not. In response to the Covid-19 pandemic Congress passed the CARES Act in March 2020. The CARES Act included provisions to help federal student loan borrowers, including a pause on payments for some federally connected loans, 0% interest rates, and a pause on collections. Currently, that pause is scheduled to end on August 31, 2022. The pause has been extended several times so check back for updates as the deadline approaches. You can also find more information here.
Even those without federally connected loans may have options through their private loan provider, read on for more information.
What is a federally connected loan?
Not all student loans are federally connected. Federally connected loans include Direct Loans, which are owed directly to the government; Perkins Loans, which are owed to your school; and Federal Family Education Loans (FFEL), which were made by a private company or state agency but guaranteed by the federal government.
If you want to be able to tell whether your loans are federally connected, you should log in to Studentaid.gov. If you see your loan listed there, it is federally connected. If you don't, then it is not federally connected. The listing should also tell you if your loan is a Direct Loan, a Perkins Loan, or an FFEL.
Do I qualify for an "administrative forbearance?"
The pause in payments is called an “administrative forbearance.” Some federal loan borrowers can take an "administrative forbearance" from making payments on their loans until August 31, 2022. This means you don't have to pay your payment. During this time interest will be at 0%. People who have either a Direct Loan -or- a FFEL that is "held by the federal government" can take advantage of this program.
It is usually easy to tell if you have a Direct Loan by logging in to Studentaid.gov. Unfortunately, it is more difficult to find out if you have a FFEL owned by the federal government. You might be able to find out by calling 1-800-4-FED-AID, or calling your servicer, but it is not clear whether you can 100% trust the information you get there to be accurate.
How do I get an administrative forbearance if I do qualify?
You can ask your servicer (i.e. the person you pay your bill to) for this forbearance, but it is not necessary to do that - if you do not make your payment, you will automatically be placed into forbearance.
What if they are threatening to take -- or have already taken -- my federal tax refund, wages, or federal benefits (social security, etc)?
Debt collection for all federally connected loans that are in default - Direct, Perkins, or FFEL - has been halted until August 31, 2022. That includes wage garnishments, garnishments of federal benefits, and offsets of tax refunds.
However, if your tax refund was already offset previously, you will not be able to get your refund back without specifically asking your servicer for a hardship. You can claim a hardship by submitting a request to your loan servicer. Make sure you point out why you need access to your tax refund, and be specific.
Typical hardships may include
Pending eviction or foreclosure (or likely inability to pay built up back rent or house payments after the moratoriums end)
Loss of a job, COVID related or otherwise
Cessation or offset of unemployment benefits
You can submit the hardship request even after your refund, benefits, or wages have been garnished
Iowa Legal Aid Provides Legal Help to Low-Income Iowans
To apply for help from Iowa Legal Aid:call 800-532-1275.
- Iowans age 60 and over, call 800-992-8161 or apply online at iowalegalaid.org
- If Iowa Legal Aid cannot help, look for an attorney on “Find A Lawyer” on the Iowa State Bar Association website iowabar.org. A private attorney there can talk with you for a fee of $25 for 30 minutes of legal advice.
*As you read this information, remember this article is not a substitute for legal advice.