Lana Oconnell
The COVID-19 pandemic has had a significant impact on student loan repayment. In response to the crisis, the US Department of Education announced that federal student loan payments would be automatically suspended for all borrowers until September 30, 2020. This change provided much-needed relief for those facing financial difficulties due to job losses and economic uncertainty. During this period, borrowers in default also benefited from temporary stops to wage garnishing, collections, and withholding of certain benefits. Additionally, the interest rate was lowered to 0% for eligible loans, allowing borrowers to reduce their principal balance without incurring interest charges. While the initial suspension ended in 2020, both the Trump and Biden administrations extended the federal student loan payment pause multiple times, with the final extension ending on September 1, 2023. While private student loans were not included in the automatic suspension, borrowers in this category could contact their lenders to discuss alternative arrangements if they faced challenges during the pandemic. As the world navigated the financial fallout of the coronavirus outbreak, these measures provided a safety net for millions of student loan borrowers, offering a temporary reprieve from repayment obligations.
| Characteristics | Values |
|---|---|
| Federal student loan repayment | Suspended automatically until September 30, 2020 |
| Interest rate | 0% |
| Private student loans | No changes |
| Wage garnishing | Temporary stop |
| Collections | Temporary stop |
| Social Security, disability, or federal tax rebate withholding | Temporary stop |
| Payment pause | Ended on September 1, 2023 |
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What You'll Learn
Student loan repayment was suspended until September 30, 2020
In response to the coronavirus pandemic, federal student loan repayment was suspended until September 30, 2020. This was a change from the previous opt-in system, with the US Department of Education announcing that federal student loan payments would now stop automatically for all borrowers. This meant that anyone with federal student loans did not have to make payments until September 30, 2020, and their loans were placed in automatic administrative forbearance. This was later extended to December 2020.
It is important to note that this change did not apply to private student loans. Borrowers with private loans needed to contact their lenders directly to discuss their options and make arrangements if they were affected by the pandemic.
During the forbearance period, interest rates on federal student loans were lowered to 0%. This meant that any payments made by borrowers during this time went directly towards the principal of the loan, reducing the overall loan amount. Borrowers who had made payments after March 13 could request a refund.
While the suspension of federal student loan repayments provided relief to many, some experts advised that those who could afford to continue making payments should consider doing so. This was because the long-term economic impact of the pandemic was uncertain, and continuing payments would help reduce the overall loan debt. Additionally, those with other high-interest debts might want to prioritize paying those off.
The suspension of federal student loan repayments was a part of the CARES Act, which provided economic relief to various sectors during the coronavirus pandemic. This act was passed by Congress in March 2020 and included relief for student loan borrowers, such as those enrolled in the Public Service Loan Forgiveness Program.
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Interest rates were lowered to 0%
During the COVID-19 pandemic, interest rates on student loans were lowered to 0% for all eligible loans. This was a significant change, as it meant that interest was not charged on covered loans during the suspension, and borrowers' student loan balances were not growing. This measure was in place until the end of August 2023, and it gave borrowers the opportunity to pay down the principal balance of their loans while the payment pause was active.
The CARES Act, passed by Congress, paused payments on most federal student loans in response to the pandemic. This was further extended multiple times by President Trump and President Biden. The payment pause applied to all federal student loans held by the Department of Education, but it did not include private student loans.
The payment pause ended on September 1, 2023, and interest on federal student loans resumed. Borrowers with federal student loans will receive their first bills in September 2023, and payments will be due starting in October 2023.
During the payment suspension, there were no collection activities on loans in default that were covered by the pause. This meant no collection calls, wage garnishments, or money taken from tax refunds or Social Security benefits to collect on defaulted loans. The Department of Education's Fresh Start program prevents immediate collection once the pause ends.
While the interest rate was 0%, any payments made by borrowers went directly towards the principal of the loan, on which interest is calculated. This allowed borrowers to reduce the overall cost of their loans.
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Borrowers could continue to pay manually
In response to the coronavirus pandemic, the US Department of Education announced that federal student loan payments would be stopped automatically, a change from the previous opt-in system. This meant that federal student loan repayment was suspended for all borrowers until September 30, 2020.
However, borrowers who could continue to pay their student loans had the option to do so manually. This applied to those with a steady income who wished to continue chipping away at their loan. To continue making payments, borrowers were advised to contact their student loan servicer. Payments could be made manually through the servicer's website, or borrowers could ask to have automatic payments resumed and opt out of the forbearance.
Borrowers who continued to make payments during the forbearance period benefited from the fact that all student loan interest rates had been lowered to 0%payments made went directly towards the principal of the loan, reducing the amount of interest that would accrue over time.
It is important to note that the suspension of federal student loan payments was not the same as loan forgiveness. Borrowers who opted for the forbearance plan would still need to make up for any missed payments. These payments would typically be tacked on to the end of the loan at the end of the forbearance period.
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Wage garnishing, collections, and Social Security stopped
In response to the coronavirus pandemic, the US Department of Education announced that federal student loan repayment would be suspended automatically for all borrowers until September 30, 2020. This included a temporary stop to wage garnishing, collections, and Social Security, disability, or federal tax rebate withholding for borrowers in default.
However, in 2024, it was reported that despite the government's promise to suspend wage garnishment on defaulted student loans, some borrowers were still facing this issue. The CARES Act, the federal government's coronavirus relief package, included a provision to stop collections, wage garnishments, and tax refund offsets from defaulted loans, but there were delays in implementing this. Some borrowers had their entire tax refunds seized, and millions of borrowers did not qualify for the Coronavirus Relief Program.
In 2025, President Donald Trump's administration resumed collections on defaulted student loans for the first time in five years. This included the seizure of federal benefits such as Social Security and wage garnishment. The Federal Student Aid office restarted the Treasury Offset Program, which withholds government benefits, including Social Security and tax refunds, from people with past-due payments. This led to concerns about the impact on borrowers, particularly those who relied on Social Security as their sole source of income.
It is important to note that these measures applied only to federal student loans, and private student loan borrowers needed to contact their lenders to make separate arrangements.
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The payment pause ended in September 2023
The payment pause on federal student loans ended on September 1, 2023, after being implemented in March 2020 due to the COVID-19 pandemic. This means that interest on federal student loans has resumed, and borrowers will receive their first bills in September, with payments due starting in October 2023. The payment pause did not apply to private student loans, and borrowers with private loans needed to contact their lender to make arrangements.
During the payment pause, the interest rate was lowered to 0% for all eligible loans, and no collection activities should have occurred on loans in default that were covered by the pause. Borrowers who continued to have a steady income could opt to continue making payments manually or ask to have automatic payments resumed. As a result, any payments made during this period went directly towards the principal of the loan. Now that the payment pause has ended, borrowers can take advantage of the Department of Education's Fresh Start program to quickly and easily get their loans out of default and prevent future collection.
The end of the payment pause also impacts borrowers in the SAVE Plan. When the forbearance ends, borrowers will be responsible for making monthly payments that include any accrued interest, as well as their principal amounts. The Department of Education encourages borrowers with loans in the SAVE Plan to use the Loan Simulator to compare available repayment plans and determine which option best meets their repayment goals.
Additionally, the Trump Administration has made changes to the federal student loan system, including the introduction of new lifetime borrowing caps and the scrapping of most existing repayment plans. These changes affect both current and future borrowers, with nearly half a million borrowers potentially facing higher payments. The Administration also paused student loan forgiveness under the IBR plan, which offered loan forgiveness after 20 to 25 years of payments.
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Frequently asked questions
Federal student loan payments were initially suspended until September 30, 2020, and this relief was extended until December 2020. The Biden administration has since extended the pause on federal student loan payments several times, with the current moratorium lasting until May 1, 2022.
Private student loans are not automatically included in the payment suspension. You will need to contact your lender to discuss your options if you are facing financial hardship.
If your payment was made after March 13, 2020, you may be able to request a refund.
If you are facing financial difficulties, you can consider changing your repayment plan, applying for a deferment or requesting a special disaster forbearance for COVID-19.
If you have the financial means and no higher-interest debts, it is generally advisable to continue making payments, especially since interest rates have been lowered to 0%. This will help you reduce your overall loan debt faster.
