(UPDATED MARCH 27, 2020)
Help is on the way for your student loans.
Here’s what you need to know – and what to do about it.
Student loan repayment
More than ever, student borrowers are looking for ways to lower their monthly student loan payments. The CARES Act, which is the new $ 2 trillion stimulus bill to help those affected by the coronavirus, directly assists borrowers with student loans and provide financial relief. Let’s clearly understand what’s included (and not included) so you can make an informed decision about your student loans. Those student loan repayment efforts are added to Trump’s paid sick leave plan.
There are five main areas that impact your student loans:
1. Stop Paying Your Federal Student Loans
The CARES law allows you to stop paying your federal student loans from now until September 30, 2020. Previously, President Donald Trump also announced that you have the option to stop paying your federal student loans for 60 days. However, you don’t have to stop paying your federal student loans, but you do have the option. What happens after September 30, 2020? Without an extension, you would resume paying your federal student loans in the normal course. Plus, your student loan balance won’t change until September 30, which means the federal government won’t pay off your student loans for you.
2. No interest on federal student loans
It’s a big one. The CARES law waive student loan interest on your federal student loans until September 30, 2020. Donald Trump previously announced through executive action that he was waiver of interest on federal student loans. If you choose not to pay your Federal Student Loans during this time, the interest rate on your Federal Student Loan will be set at 0% and you will not be penalized with accrued interest.
3. The skip of payment counts towards the remission of the civil service loan.
The public service loan forgiveness program requires 120 monthly student loan payments, although the payments are not necessarily consecutive. If you are looking for a utility loan discount and decide to skip payments until September 30, 2020, the skipped payments will count toward the 120 required monthly payments.
4. Tax-free employer contributions for student loans
If your employer pays student loans as a benefit, there is more good news in the CARES Act. Now your employer can pay up to $ 5,250 in your student loans tax-free this year.
5. Suspension of debt collection on student loans
The CARES Act also stops involuntary collection of student loan debts during this period, including wage garnishment, tax refunds, and Social Security benefits. Earlier this month, Trump student loan debt collection order of 9 million student loan borrowers who defaulted on their federal student loans. New York Governor Andrew Cuomo temporarily suspension of student loan debt collection and also suspended mortgage payments for those who encounter financial difficulties.
What is not included
There are several important areas not addressed in the CARES Act that may impact your student loan:
Private student loans
Temporary student loan relief only applies to federal student loans and not to federal student loans. private student loans. Thus, the interest rate on your private student loans will not drop to 0% until September 30, 2020. Likewise, your private student loans are payable according to your normal payment schedule. If you’re having trouble repaying private student loans, you can contact your lender and student loan manager to discuss potential options.
Student loan forgiveness
The CARES law does not provide for any student loan forgiveness. Senate Democrats have proposed a student loan forgiveness plan that would write off at least $ 10,000 in federal student loans for all borrowers. Former vice-president Joe Biden also asked for $ 10,000 student loan cancellation. Biden has his $ 750 billion student loan plan, which focuses on repayment based on income. House Democrats have asked $ 30,000 student loan forgiveness. These student loan forgiveness efforts required a much smaller amount than offered by Senator Elizabeth Warren’s original student loan forgiveness plan for cancel student loan debt. Senator Bernie Sanders (I-VT) also offered to forgive the $ 1.6 trillion in student loan debt, including federal and private student loans.
Options for your student loans
What else can you do to pay off your student loans faster and save money during this tough time? Here are four options, all free: