Are Students Title IV-Eligible While Their Defaulted Loans Are In Temporary Forbearance Under the CARES Act?

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Scenario: In an attempt to resolve her default status and regain eligibility for Title IV aid, a student who is in default on a Title IV loan submitted her loan servicer's letter explaining the temporary provisions of administrative forbearance under the CARES Act.

Answer: No. The temporary administrative forbearance only suspends payments; it does not resolve the default. Students who were in default when the COVID-19 administrative forbearance started remain in default and are not eligible for Title IV aid until that default is resolved by either loan rehabilitation, a satisfactory repayment arrangement, or loan consolidation. Suspended payments count towards loan rehabilitation under 34 CFR 674.39 and 685.211(f). Suspended payments do not count towards satisfactory repayment arrangements under 674.2(b), Satisfactory repayment arrangement and 685.102(b), Satisfactory repayment arrangement, so the student would need to continue to make payments during the forbearance in order to clear the default with a satisfactory repayment arrangement; otherwise, payments resume after the forbearance ends. The student should contact his, her, or their servicer about continuing to make payments under that satisfactory repayment arrangement during the forbearance period.


See AskRegs Q&As, Will Loan Payments Suspended Due To Coronavirus Count Toward Loan Rehabilitation? and Will Loan Payments Suspended Due To Coronavirus Count Toward Satisfactory Repayment Arrangements?

See ED's Coronavirus and Forbearance Info for Students, Borrowers, and Parents website.
 

AskRegs Q&As represent NASFAA's understanding of regulatory and compliance issues. They are FOR INTERNAL USE ONLY. While NASFAA believes AskRegs Q&As are accurate and factual, they have not been reviewed or approved by the U.S. Department of Education (ED). If you should need written confirmation of AskRegs information for audit or program review purposes, please contact your ED School Participation Division. NASFAA shall not be liable for technical or editorial errors or omissions contained herein; nor for incidental or consequential damages resulting from the furnishing, performance, or use of this material.