Use coronavirus stimulus student loan benefits to pay off debt quicker — here's how

Student loan borrowers enjoy several benefits under the CARES Act.

Thanks to the Coronavirus Aid, Relief, and Economic Security (CARES) Act, a large swath of Americans are receiving $1,200 paychecks straight from the government. For parents, the payments are even higher, tacking on an extra $500 per child.

Though the stimulus checks are designed to help soften the blow for those who have been laid off or seen their wages cut due to COVID-19, the payments also have the power to help Americans still actively in the workforce, too — specifically, those seeking student loan repayment benefits.

In fact, the coronavirus crisis has set student loan interest rates to historic lows, encouraging many with student loan debt to consider refinancing. If this is an option that interests you, make sure you use Credible to compare multiple lenders in order to find the best student loan refinancing rates available.

Here's a rundown of how you can use the federal government's stimulus package to alleviate concerns over education expenses and student debt.

Use coronavirus relief benefits to pay off student loans quicker

First, there’s the option to use your stimulus check to increase monthly payments toward your student loan balance. Doing so would lower interest rate costs in the long-term and help you pay off your federal student loans sooner.

If you have federal student loans, you’ll need to contact your student aid servicer to go this route. Under the CARES Act, all federal loans have automatically gone into forbearance, and no autopayments are being processed until October. No interest is being charged during this time period either. In addition to making extra payments, you can also use this time to:

Refinance student loans

“Since interest rates are at one of the lowest points we may see in our lifetime, borrowers that do not qualify for the PSLF (Public Service Loan Forgiveness) program or other forgiveness programs should seriously consider refinancing their loans to a lower interest rate,” said Randy Lupi, regional vice president at Equitable Advisors, noting refinancing student loans could be a good move.

Sites like Credible make it easy to compare refinancing lenders. See what student loan refinancing rates and loan programs you qualify for by inserting your loan amount and estimated credit score now.

If you're looking to refinance student debt, you should consider using a refinance calculator to get a better picture of how much money you could save on college costs and beyond.


Both federal and private student loans can be refinanced with a private lender, which offer a variety of rates and terms.

Apply for student loan forgiveness

If you work in a public service field, you might qualify to have your student loan debts forgiven under the Public Service Loan Forgiveness program (PSLF). The CARES Act offers an extra benefit to borrowers on these plans (more on that below), so it’s an especially smart time to enroll if you’re eligible.


Consolidate loans

Consolidating your loans — or rolling them into a single loan, is also an option. You can even roll other debts, like credit cards, personal loans, private student loan debt and other loan amounts into the mix as well. This streamlines your student loan repayment process (there’s just one payment a month) and depending on your interest rates, it could lower your costs as well.

Before you commit to consolidation, make sure you understand the pros and cons — particularly, compared to student loan refinancing — to determine if it meets your goals. Refinancing may make more sense if you're looking to combine loans, change repayment terms, lower monthly costs or more.

What student loan benefits does the CARES Act include?

Stimulus checks aside, the CARES Act also includes a few key perks for student loan borrowers. As previously mentioned, all borrowers with federal loans will see their payments paused through the end of September. This is called “forbearance.”

No interest will accrue on federal loan balances during this time, and no payments will be reported late to any credit bureau. There’s also no action required to reap these benefits.


On the downside, though, these benefits are only available if your loan is owned by the federal government. And according to Travis Hornsby, found and CEO at Student Loan Planner, many Americans won’t qualify for them.

“Unfortunately, this bill does absolutely nothing for borrowers with private student loans, FFEL loans held by a commercial lender, or the Department of Health student loans,” Hornsby said. “The government stopped issuing FFELP loans in 2010, so anyone who graduated or went to school before that time likely has this kind of student loan and does not qualify.”

Does the CARES Act include federal direct student loan forgiveness?

Though borrowers were no doubt hoping the CARES Act would offer some sort of loan forgiveness benefit, it, unfortunately, does not. For those that qualify for the Public Service Loan Forgiveness program, there is a nice perk, though.

The PSLF program requires borrowers to make at least 120 on-time payments toward their loan before the balance can be wiped clean. Under the CARES Act, all skipped payments during the forbearance period (through September 30) will count toward that qualifying number.

“The good news for borrowers enrolled in Public Service Loan Forgiveness is that they will receive credit toward their qualifying payments during this administrative forbearance, as long as they were already in the program and continue to meet other eligibility requirements related to their employer and full-time status,” explained Amy Lins, senior director of learning and development at Money Management International. “These payments will also count toward income-driven repayment plan payments and forgiveness.”

Don’t forget to pad that savings account

At the end of the day, it’s important to think long-term during the current health crisis — especially as checks from the federal government's coronavirus stimulus package start rolling in. Though paying down your student loans can be smart, you also want to stow away some emergency funds if you’re able to, too.