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On Friday, March 27, 2020 President Trump signed the CARES Act into law. Among its many provisions are several that pertain to student loan payments.
First, the Act suspends payments on Family Education Loan Program (FFELP) and Direct Loan (DL) loans held by the Department of Education through September 30, 2020. Note that this does not apply to student loans held by private lenders. The suspension is automatic, so borrowers need not apply for it. During the period in which payments are suspended, no interest will accrue on the loans. Borrowers may make payments if they wish, and those payments will be applied exclusively to the principal of the loan. For borrowers enrolled in loan forgiveness programs like the Public Service Loan Forgiveness (PSLF) program, the months in which payments are suspended will still count as payments for purposes of calculating the forgiveness date. Beginning in August, the Department of Education will inform borrowers in writing when their payments are set to resume.
Second, the Act creates a tax incentive for employers to contribute to their employees’ student loan payments. It provides that employers may deduct from their tax liability payments made on employees’ student loans from the date of enactment of the CARES Act through January 1, 2020.
If you have questions about how the CARES Act and related legislation will affect you or your business, our team of attorneys can help. To contact us, email [email protected]
