Students sent home, campuses closed and online courses become the new normal. Welcome to being a college student in 2020 after the Coronavirus took its initial toll on the world.
The federal government, states, private lenders and others are offering student loan relief to help you manage the economic fallout.
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Here are more current options you have, plus some helpful information about student loan relief as credited from the Nerd Wallet.
Federal student loan relief
The federal government is offering options for borrowers who need help with their student loans. The following measures last until Sept. 30 and are retroactive to March 13:
- Automatic forbearance to all federal loan borrowers.
- Automatically waiving interest on federally held student loans.
- Stopping all collection activities on federal student loans in default.
Borrowers with federally held student loans will automatically receive a six-month forbearance, retroactive to March 13. No payments will be due during this break. Additionally, no interest will accrue, which is typically not the case with forbearance.
All auto-debit payments will be automatically suspended. But you may want to cancel your auto-pay via your servicer’s website to ensure money isn’t taken before the waiver is implemented. You can request a refund if this happens.
This forbearance is automatic, but you can still make payments of any amount over the next six months if you want to reduce your balance. Or use the pause to prioritize other money moves, such as starting an emergency fund or paying down high-interest debt, since your student loan balance won’t increase during this break.
Due to the forbearance, your repayment term may be extended so your final payment date will be six months later than you originally thought.
If you’re entering repayment for the first time, there may be some overlap with your grace period. Usually interest on unsubsidized direct loans continues to build during the grace period, but if your grace period overlaps with the administrative forbearance, interest will not accrue during those months.
This administrative forbearance supersedes all other deferments or forbearances. If your prior forbearance or deferment’s original end date was after Sept. 30, 2020, it will be reinstated beginning Oct. 1, 2020.
The interest rate on federal student loans is set to 0% for six months, retroactive to March 13. During this time, no new interest will accrue on federally held student loans.
If you repay loans during this period, your entire payment will go toward your principal balance, provided you have no other outstanding interest or fees on the loans. This will save you money overall, though your actual payment amount won’t change.
The federal government has ceased all collection activities on federal student loans until Sept. 30. These activities include wage and Social Security garnishment, tax refund seizure and collection calls and letters.
This policy is retroactive to March 13, meaning you’ll receive a refund for any forced student loan payments since that date. But if your 2019 refund was seized before March 13, it is not required to be returned.
Alternate repayment plans
Federal student loan borrowers can choose from a number of different repayment options. If you’ll be unable to afford your student loan payments in the long term, enrolling in an income-driven repayment plan is typically your best option.
These plans base your monthly bills on your current income and family size. Payments can be as little as $0.
If you already use an income-driven plan and your financial situation has changed, you can request a new payment amount. If you were supposed to recertify your plan before Sept. 30, you’ll now have an additional six months to do so. IDR recertification dates have been extended six months from borrowers’ original recertification date. Borrowers will be notified when it is time to recertify.
You should still use the time during the government’s payment suspension to complete your enrollment paperwork or provide updated financial information. That way, your new payment will hopefully be in place once your forbearance ends.
Private student loan relief
Private lenders typically offer opportunities to pause payments for up to 12 months or longer with forbearance or deferment policies. These policies vary from lender to lender and, unlike current federal loan forbearance, interest will continue to accrue. Check out iFlipd's Private Loan comparison tool here.
Student loan refinancing
Student loan refinancing rates are currently low due to the economic climate. If you already have private student loans, strong credit and steady income, see if you can save money — monthly or overall — by qualifying for a lower interest rate.
Relief efforts in your state
Multiple states have partnered with specific student loan servicers to offer a 90-day forbearance for commercially held federal loans and private student loans. Unlike the payment suspension in the CARES Act, interest will accrue during this break and you must contact your servicer to request it.
If your servicer is participating, relief is available in the following states:
- New Jersey.
As part of this multi-state agreement, servicers have also agreed to temporarily waive late payment fees, stop negative credit reporting and pause debt collection lawsuits.
New York has made similar relief available to its residents through a separate agreement; the state has also temporarily stopped collections on student loans referred to its attorney general’s office.
Relief efforts at your school
With students no longer attending classes in person, colleges are taking two main actions:
- Continuing to keep housing open for its most vulnerable population, including homeless and international students. At University of Washington in Seattle, for example, residence halls are remaining open for students who need to stay on campus, but only in dorms with private bathrooms to encourage social distancing. At Purchase College, State University of New York — located in one of the hardest-hit counties in New York — classes moved online, but certain groups of students are allowed to stay. This includes those without anywhere else to go, as well as international students and students without technology needed to complete online courses.
- Offering refunds on housing and fees to students. The University System of Georgia is issuing refunds at a percentage of the semester’s cost for housing, dining and certain fees, as well as study abroad. At Binghamton University, State University of New York, charges for housing, meal plan and on-campus fees are prorated once a student leaves campus. Students receive a credit balance automatically applied toward the fall semester unless a student requests a refund.
- Distributing emergency financial aid and cash grants.The Department of Education is distributing $6.28 billion in funds for emergency cash grants to colleges to distribute to students who need funds. The grant money can be used for technology, food, housing, health care, childcare and any course materials. Colleges are still determining how best to distribute grant funds, but your financial aid office will likely have the most up-to-date information. Schools may have their own well of emergency financial aid resources available for students in addition to the emergency cash grant fund.
If your college moves to online learning or has already done so, call the school’s financial aid office to inquire about its refund policy. If you have no other suitable housing options, contact your college’s housing office to inquire about options for staying on campus.
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