Student Loans in the News: Can Lenders Take Your Stimulus Payment?
A brief round-up of recent articles and blog posts that discuss current student loan debates and data
About the author: Kevin Mahoney, CFP® is a Millennial financial expert and fee-only financial advisor in Washington, D.C. Kevin's work with his clients focuses on paying off student loans, buying a house, investing savings, and budgeting. Kevin is the founder & CEO of Illumint, a virtual financial planning firm specifically designed to help couples and young families with their financial decisions.
Can Your Student Loan Lender Take Your Stimulus Payment?
Author Adam S. Minsky writes:
"Many borrowers are repaying their federal student loans under an income-driven repayment plan, such as Income Based Repayment (IBR) or Pay As You Earn (PAYE). These plans use a formula applied to the borrower’s income to calculate monthly payments. The payments get recalculated annually. Any changes to the borrower’s income or family size can result in changes to the monthly payment amount.
Some student loan borrowers have been worried that their stimulus payments could change their monthly payment amount under an income-driven repayment plan. But this should not be the case. Only “taxable income” is considered “income” for purposes of calculating monthly payments under an income-driven plan. Under the CARES Act, the stimulus payment is not considered “taxable income” at all. Borrowers do not have to report the stimulus payment as income to their loan servicer, and it should have no impact on monthly payments under an income-driven repayment plan."
Now is not the time to refinance your federal student loans, says the CEO of a student-loan refinancing company
Author Laura Grace Tarpley writes:
"'We're encouraging people to take advantage of federal leave,' says Klein.
The federal government is offering student loan forbearance for borrowers until September 30. Borrowers with loans held by the Department of Education have automatically had their federal loan payments paused, regardless of whether they've been financially impacted by the coronavirus or not. If you want to continue paying down your debt at this time, you have to call your servicer to set up payments.
This means borrowers don't have to make payments right now. Interest isn't accruing, and missed payments aren't being reported to credit bureaus.
'[CommonBond's] mission is to help people save money and to have the broadest positive impact possible,' says Klein. 'And what that means in this extraordinary time is ... If you have a federal loan, you should take advantage of federal relief.'
Klein realizes that everyone's situation is different, so there may be exceptions to his advice."
Student Loans Aren’t Forgiven, so They Can’t Be Forgotten
Author Ryan Lane writes:
"Whether you want to postpone payments, enter an income-driven plan or request a new payment, your primary contact will be your student loan servicer.
And that concerns Frotman.
'What we have seen is that the federal student loan system is so broken,' he says.
As an example, Frotman notes servicers’ inability to effectively communicate with borrowers after the hurricanes and wildfires of 2019, leading in part to a 14% increase in student loan defaults.
Currently, servicer call centers are closed or understaffed. As a result, you may experience communication issues and delays processing income-driven repayment applications or other forms. Stay vigilant.
'Take advantage of the six-month time,' says Bonnie Latreille, director of research and advocacy for the Student Borrower Protection Center. 'Take action now.”'
[Read the entire article over at NerdWallet]