With unemployment levels rising and many employers cutting work hours, lots of college grads are now struggling to meet their student loan payments. Thankfully, the federal government has passed legislation to ease this burden. Unfortunately, though, many borrowers are confused about the terms and conditions of these changes.
Here’s all you need to know about the changes to student loan debt during the coronavirus pandemic.
All federal student loan payments are automatically suspended for six months
As part of The Coronavirus Aid, Relief and Economic Security Act (the CARES Act) signed into law on March 27 all federal student loan payments are suspended, interest-free, through Sept. 30, 2020. If borrowers continue making payments, the full amount will be applied to the principal of the loan. The suspension applies to all federal student loans owned by the Department of Education as well as some Federal Family Education Loans (FFEL) and some Perkins loans. Students do not have to take any action or pay any fees for the suspension to take effect.
Additionally, during the suspension period, the CARES Act does not allow student loan servicers to report to the credit bureaus borrower non-payments as missed payments. Therefore, the suspension should not have a negative effect on borrowers’ credit scores.
If you’re not sure whether your student loan is federally owned, you can look it up on the Federal Student Aid (FSA) website. Be sure to have your FSA ID handy so you can sign in and look up your loans.
Some states and private lenders are offering student loan aid for struggling borrowers.
If your student loan is not federally owned and you are struggling to meet your payments, there may still be options available, such as loan deferment or forbearance. If you are in need of such assistance, contact your lender directly to discuss your options.
Consider an income-driven repayment plan.
If you have an FFEL that is ineligible for suspension, you can lower your monthly payments by enrolling in an income-based repayment plan, which adjusts your monthly student loan payment amount according to your discretionary income. If your salary was cut as a result of COVID-19, or you are currently unemployed, these plans can provide relief by making your monthly payments more manageable.
As income and expenses change during COVID, now more than ever is the time to get your finances in line. For helpful tips, useful calculators, and interactive online coaches, visit the Financial Literacy section of www.NobleCU.com.
Noble Credit Union, voted one of the best credit unions in California, offers offer members full access to a wide range of financial services, including personal loans, online and mobile banking, new and used vehicle loans, and more. For more information about membership at Noble Credit Union, call (559) 252-5000 or visit NobleCU.com.