Cares Act Executive Order Clarification

CARES Act memorandum updates and clarifications.

CARES Act Clarification of recent order

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) provided a payment suspension and interest waiver for federally-held student loans, set to expire on 

September 30, 2020. The CARES Act specifically directs that the months of the payment suspension shall be counted towards federal loan forgiveness for borrowers enrolled in Income-Driven Repayment Plans.

On August 8, 2020 President Trump directed the Department of Education to continue the temporary cessation of payments and the waiver of interest on student loans held by the Department of Education until December 31, 2020.

The Executive Memorandum for the Secretary of Education directs the Secretary to implement “waivers of and modifications to the requirements and conditions of economic hardship deferments” pursuant to the Higher Education Act of 1965 to effectuate the continued payment suspension and interest waiver.

What this action fails to address

Notably, the Memorandum does not address whether the three months of payment suspension from October through December will be counted as progress towards forgiveness.

Under the Higher Education Act, periods of Economic Hardship Deferment are counted towards long-term Income-Driven Forgiveness. Still, they are NOT counted towards the 120 payments required to earn Public Service Loan Forgiveness (unless the borrower makes payments of at least the amount required under a standard 10-year repayment term).

Furthermore, an important consequence of economic hardship deferment is the capitalization of unpaid interest at the conclusion of the forbearance period. Under the CARES Act, borrowers were granted an Administrative forbearance, and ED made clear that interest would not capitalize at the end of the forbearance period.

StudentAid.Gov has not been updated

At the time of this writing, the Department of Education has not updated the website with information regarding the implementation of the August 8, 2020 executive action.

While it’s possible the terms of the CARES Act provisions will be extended, it’s also possible that many borrowers would be better off entering into repayment upon the termination of the CARES Act forbearance.

It’s also likely that further legislative action will be passed that may alter the administration of student loans beyond the EO signed over the weekend. 

We will provide an update as more clarity is provided.

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Jantz Hoffman

Jantz Hoffman

Jantz is the executive director and co-instructor at the CSLA Institute who administers and oversees the ethical and professional standards of the Certified Student Loan Professional (CSLP®) designation. He received his masters in business with a certificate in finance from Colorado State University in 2014 and his bachelors degree in education from Humboldt State University in 2002.

About the CSLA Institute

Educational services to professional financial advisors student loan borrowers.

The CSLP program for financial professionals enables their delivery of advisory services to clients with student loans. Student loan borrowers can locate qualified advisors to assist with their student debt questions and planning.

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