The Coronavirus Aid, Relief, and Economic Security (CARES) Act includes over $2 trillion in federal funds to help address the economic fallout from the coronavirus global pandemic. The bill includes several provisions that affect college students, including deferred student loan payments and money for carryover funding of colleges and universities around the U.S. At the same time, the CARES Act provides stimulus checks, mortgage and rent payment relief and more.
The uncertainty created by the coronavirus pandemic can be difficult to navigate. Talk to a financial advisor today to begin planning your financial future.
The CARES Act and College Students
The CARES Act that was passed in March includes funding and other provisions designed to support a range of businesses and individuals who have been affected by the coronavirus pandemic. College students and colleges themselves receive certain benefits from the CARES Act as well. In fact, colleges will receive funding and students may get loan relief and work-study payments despite disruptions caused by the coronavirus outbreak.
Federal Student Loan Relief
The CARES Act includes provisions that help relieve every college student who is currently using federal student loans to pay for college or who is in the process of repaying federal student loans. Students temporarily won’t be subject to involuntary collections for defaulted student loans. Typical student loan payments are also suspended through Sep. 30, 2020. In addition, no interest is allowed to accrue on loans during this time period, and it won’t hurt your credit score.
The Department of Education is required to submit the suspended loan payment months to credit bureaus as months where the borrower made their loan payment on time and in full. Note that commercial loans, private loans and campus-based Perkins loans are not covered under this provision.
Financial Aid and Work-Study Payments
Thanks to the CARES Act, colleges and universities are allowed to use Supplemental Educational Opportunity Grant (SEOG) funds for scholarships. They also don’t have to match match federal funds for campus aid programs.
Colleges are also allowed to pay students who participate in work-study programs, even if they’re unable to work due to the coronavirus pandemic. Students who had to leave school due to the pandemic will not have the current term count towards financial aid time limits. Satisfactory academic progress requirements for students and teachers working towards teacher loan forgiveness will have their requirements waived.
Roughly $13 billion is allotted from the CARES Act to go directly to higher education institutions. This will be used to cover financial aid grants and other disruptions that stem from the pandemic.
Tax-Free Student Loan Repayment Benefits for Employers
The tax exclusion that exists for businesses who provide educational assistance to employees is being temporarily expanded to include employer-paid student loan benefits. This provisions is only applicable until the end of 2020, which equated to a single tax year.
Employers who were previously allowed to provide up to $5,250 toward the education costs of an employee can now apply the exclusion to the existing student loan debt of an employee. The benefit is excluded from the eligible employee’s wages, making it tax-free.
The most well-known provision in the CARES Act is the stimulus checks that most Americans have received. Individuals received up to $1,200 and couples received up to $2,400. Families also received $500 per child claimed as a dependent.
Unfortunately, many college students are likely to be excluded from the stimulus check program. The IRS notes that qualifying children will not receive stimulus payments. More specifically, if you are under the age of 19 or are a full-time student under the age 24, you likely won’t qualify. This is bad news for many college students who work to put themselves through college and who could use some extra cash to help support themselves during these difficult times.
The CARES Act includes several provisions that affect colleges and universities, as well as their students. Students will have access to downside-free debt and interest deferment on student loans, and the financial aid and work-study programs they’re dependent on will remain largely unaffected thanks to federal funding. Despite the fact that college students are likely ineligible for the stimulus checks, they are likely to still see multiple personal benefits from the law.
Tips for Managing Your Student Loans
If you’re paying back student loans, chances are the coronavirus pandemic has messed with your plans. Talking with a financial advisor can help, and finding one through SmartAsset’s free tool can make connecting with financial advisors in your area much easier. If you’re ready to get connected with local advisors, get started now.
Have you found yourself laid off or furloughed as a result of the COVID-19 pandemic? Check out SmartAsset’s guide on what to do if you lost your job during the pandemic.
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