The coronavirus pandemic has disrupted life all over the globe. Not only has it taken lives, devastated families, caused excessive stress and worry, but it’s also hit a lot of people hard financially. It’s caused roughly 39 million Americans to file for unemployment benefits.
If you’re a student loan borrower, you’ve likely been impacted by the effects of coronavirus, too, so it’s crucial to understand what’s changed.
What’s Changed?
Under the Coronavirus Aid, Relief and Economic Security (CARES) Act, those who have student loans have been afforded some protection when it comes to making payments. Also, during that time, interest rates have changed as well.
Interest Rates
During the six months covered by the CARES Act, federal student loans will be set at a 0% interest rate. That way, if you need to stop making payments because of a job loss, or other economic impact from coronavirus, you won’t be falling further into debt from your student loan.
Since interest rates for all loans have dropped because of the coronavirus crisis, borrowers in the process of receiving student loans are also seeing a benefit. For new loans taken out between July 1, 2020, and June 30, 2021, interest rates have decreased by about 1.78 percentage points.
Federal Student Loan Repayment
In anticipation of many people having trouble making payments because of the damage coronavirus did to the economy, federal student loan borrowers are entitled to a payment suspension of six months, until Sept. 30, 2020.
If the economic troubles haven’t impacted you directly and you want to keep making your payments, you’re free to do so. You just won’t be penalized if you don’t.
If your student loans are currently in default, you’ll have a six-month break from having your wages garnished. That break will last until Sept. 30, and it extends to other forms of income as well, such as Social Security and tax refunds.
Private Student Loan Repayment
Those who have student loans through private lenders may also see some benefit. Some of these lenders are offering forbearance options to those affected financially by the coronavirus. Some companies are also waiving late fees.
But, unlike with federal loans, private lenders aren’t required to offer any breaks to help their customers cope with the current economy. To learn what your lender is offering, if anything, you should call or email them, or pay attention to any correspondence they send you that goes over the changes.
You may be able to refinance your student loans to a lower interest rate or a longer repayment term to get some relief if your lender is offering any hardship options.
Income-Driven Repayment Plans
If you have experienced full or partial income loss during the coronavirus pandemic, don’t worry. If your payments are lowered or paused because of a job loss, you’re still OK for your student loan forgiveness that you’ll receive in 20 or 25 years.
Public Service Loan Forgiveness
If you’re under a Public Service Loan Forgiveness plan, you won’t jeopardize your loan forgiveness by pausing your payments until Sept. 30, 2020. Even your non-payment months during this time will go toward your 120 payments you have to make before your loan will be forgiven.
Bottom Line
The CARES Act has provided major relief and changes for those who have existing student loans. Plus, those who are seeking a loan right now for school will be able to land more favorable interest rates than they could have before the coronavirus pandemic.
These options may change the way you handle your student loans through the end of September. It may also help change your relationship with money as a whole, as the Great Depression did with many of our ancestors. But, remember, if you can continue to pay off your student loans during this time, you should.
