By the end of 2019, student loan in America reached $1.48 trillion. There were approximately 45 million borrowers across the United States.1 The COVID-19 pandemic has created even greater financial instability for many Americans and those that have student loans may have more difficulty paying them than ever before.
The Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, was recently enacted to provide a wide array of assistance for families and businesses. The legislation also made some important changes to assist federal student loan borrowers.
Here are some answers to a few important questions regarding student loan debt during the current pandemic:
Question #1: Are Interest & Payments Suspended on All Student Loans?
The suspension of payments applies only to student loans that are held by the federal government. However, your FFEL (Federal Family Education Loan) lender or school may suspend interest and payments voluntarily, but they are not required to do so.
Regarding your federal student loans, all interest and payments are suspended through September 30, 2020.2
The benefits authorized by the CARES Act do not apply to private student loans that are owned by banks, credit unions, schools or other private entities. If you are trying to suspend payments to these institutions, you will need to contact them directly to find out what your options are.
Question #2: Should I Apply to Suspend My Payments or Interest?
Until September 30, 2020, there will be no interest accrued or payments due for federal student loans.2 There is no action required on your part as these payments will be stopped automatically.
Question #3: What Should I Do if I’m Behind on Payments?
On March 25, 2020, the Department of Education announced that it would not be withholding federal tax refunds, Social Security payments or garnishing wages from those who have defaulted on their federal student loan payments.3 In addition, private collection agencies contracted by the government will put a pause on attempting to contact defaulted borrowers.
No defaulted federal student loan will collect interest until September 30, 2020.3
Many of us are experiencing a certain level of financial stress as we navigate this “new normal” through the COVID-19 pandemic. If you are able to continue to make regular payments to your federal student loans, it is beneficial in the long-run. However, it is important to know your options have changed. If you have any questions relating to your student loan payments or other financial matters, please contact us. We are here to help!