Education

What The Coronavirus Stimulus Means For Your Student Loans


The House of Representatives has passed the CARES Act, phase three of the coronavirus disaster relief package, and it’s headed to the president’s desk. President Trump is expected to sign the legislation, as he has urged Congress to pass the the bill quickly. The bill includes relief for small businesses and airlines, expanded unemployment benefits, and more. It even helps federal student loan borrowers.

If you have federally-held student loans, you’ve received some relief in this legislation. Those with federally-held student loans will have their payments suspended through September 30th, 2020. And this bill codifies President Trump’s proposal to waive student loan interest through this time. So while borrowers aren’t making payments, their balance won’t be ballooning due to accrued interest. (Note: This relief does not apply to private student loans. Additionally, it oddly doesn’t apply to borrowers under the old bank-based system, which will likely cause confusion.)

This will help those borrowers who might be struggling from the virus or from the economic fallout of the virus. Borrowers would already be able to pause their payments under forbearance, but they would accrue interest and it wouldn’t count towards loan forgiveness programs. Regardless of borrowers’ financial situation, it frees up cash that could possibly help stimulate the economy, though with many businesses closed or with reduced operations that may be less impactful.

Here’s what else you need to know:

If you are seeking Public Service Loan Forgiveness (PSLF)…

Borrowers seeking forgiveness under PSLF benefit from this legislation because this time of non-payment will count towards forgiveness just as if they were making payments normally. Of course, those borrowers must be in qualifying employment and enrolled in a qualifying repayment plan. (Remember, you should recertify your employment annually to ensure you are on track for forgiveness.)

If you are enrolled in income-driven repayment

Borrowers enrolled in income-driven repayment (IDR) will also be able to count these 6 months towards the forgiveness offered under their IDR plan. (Plans require different lengths of repayment to qualify.)

If you are in a standard repayment plan…

Borrowers enrolled in a standard repayment plan, you will also receive this benefit. However, if you are financially able and not experiencing a hardship, you might want to consider making payments. With the interest waiver, you will be able to pay down more of your loan, even with the same payment amount. Your payment will be going to the principal (and already accrued interest) instead of paying interest that will be accumulating.

Remember: this only lasts through September. You will need to remember to make payments again in October unless Congress passes another package that extends the suspension.

If you have questions, call your student loan servicer.



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