Coronavirus, the disease that causes COVID-19, is spreading rapidly across the country, causing many businesses to shut their doors and lay off employees. Considering Americans already have approximately 119 billion dollars of federal student loan debt in forbearance, it’s clear that COVID-19 is going to have a huge impact on people’s ability to pay. If you’re one of the people who have been impacted by the coronavirus, then you’re probably wondering what your options are.
Thankfully, the United States government is taking some steps to help ease the financial strain caused by this disease. Read on to learn about your options while the coronavirus is still wreaking havoc on the economy.
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Current Federal Student Loan Repayment Guidelines
President Trump has been floating potential measures to help people who are struggling during the coronavirus outbreak. At the end of March, President Trump signed a bill to give Americans reprieve from the expense of repaying student loans.
At this time, all federally held student loans will halt required payments through September 30, effective immediately. In addition, unlike normal forbearance, these student loans will no longer accrue interest.
If you’re worried about your credit, you don’t have to. You will not be considered to be late on your payments, and thus do not have to worry about any impact on your credit. Each month of non-payment through September will be reported as an on-time payment as far as your credit is concerned.
Failure to pay during this period will also not have an impact on your ability to qualify for student loan forgiveness.
What If I’m in Default?
If you’re already in default on your student loans, you may be wondering if there is any relief in sight for you. Thankfully, the bill President Trump signed into law applies to borrowers who are currently in default as well.
If you’re already having your wages garnished or your tax refund withheld because of your default, then those collection actions will cease through the end of September. At that point, the government may choose to start collection actions again or extend the relief effort.
Are There Exceptions to the Bill?
Yes, there are certain types of federal student loans to which the bill does not apply and that will still need to be repaid. These loans include Perkins loans and commercially held Federal Family Education Loans. Anywhere from 1.2 million to 9 million borrowers will be impacted by this exception.
It’s also important to note that this law only applies to federal student loans and not to privately-held student loan debt. If you are struggling to pay your private student loans, you should speak with your lender to learn about the options available to you. Many financial institutions are working with their customers during this time.
Do I Have to Stop Paying on My Student Loans?
You know you don’t have to pay your student loans, but does the bill state that you have to stop paying them? No! If you would prefer to keep paying on your student loans during this time you are more than welcome to continue making payments.
Making payments during this time is actually a great way to chip away at the interest that you’ve already accrued on your student loans. Since you’re not required to pay any specific amount, you can make payments that fit within your budget, not just the regular amount that you owe.
What If I Can’t Pay in October?
The coronavirus is expected to impact the economy for a long time, especially while there are still active cases. It is possible that borrowers will be in no better financial situation come October and will still be unable to make their student loan payments. Assuming that deferred payments are not extended, you will still have some options available to you.
Lenders have a number of repayment options available to you, including income-based repayment. If you’re unemployed, you may even qualify for zero dollar payments.
If your income-based payment is still out of reach for you, you can request a forbearance or deferment. You will still accrue interest on your loans, but you will have some time to get your finances in order before beginning payments again.
Remember, your student loan holder is there to help you out if you can’t make payments. Don’t stop making payments without contacting your lender first to discuss your options. If you do not contact your lender, you could go into default and be subject to wage garnishment and more.
The bill signed by President Trump requires that lenders contact borrowers within 15 days of March 27 to inform them that their loan payments have been suspended. If you have not already received your notice, keep an eye out for it. In addition, lenders will need to send notices to borrowers starting August 1 to notify them that their payments will begin again soon.
The House and the Senate are currently in recess and plan to continue working on coronavirus relief when they reconvene. It’s possible that more legislation will be passed to ease the student loan debt burden. You should also expect to receive a stimulus check in the next couple of months based on your income and household size.
Want to Stay on Top of Your Finances?
COVID-19 is unlike anything we’ve experienced in our lifetimes, and it’s hard to know what’s going to happen as the infection rate continues to grow. Thankfully, the United States government is taking steps to make the financial burden a little less impactful on individuals and businesses alike. You don’t have to worry about covering federal student loan debt or accruing interest, so be sure to take some time to care for yourself during this difficult time.
Do you need a little help making ends meet, or are you interested in improving your financial wellness? You’ve come to the right place. Check the rest of our site for information about everything from personal loans to credit cards.