Student Loans in the News: The Stimulus Bill
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 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.
Stimulus bill to delay federal student loan payments for 6 months—here’s what that could mean for your credit score
Author Elizabeth Gravier writes:
"Deferment and forbearance are two ways to temporarily suspend your student loan payments. Both options protect your account from falling into delinquency, so if you anticipate trouble making your minimum payments you should inquire about both. If you don’t take these steps, you could lose your chance to qualify for income-based repayment plans and other forms of assistance down the line.
Under normal circumstances, these two federal loan postponement options look like this:
Deferment: You might qualify for this if you meet certain requirements, such as you went back to school, joined the PeaceCorps or lost full-time work. While a loan is in deferment, you aren’t required to make monthly payments but the interest on your loan will continue to accrue (with the exception of some subsidized loans). The amount of time you can defer a loan depends on the type of deferment you apply for, but borrowers who are in deferment because of financial hardship or unemployment can only defer federal student loans for a maximum of three years.
Forbearance: This is a second option to postpone your student loan payments, and it’s reserved for when you don’t qualify for deferment. Borrowers must be approved for a forbearance by their lender or servicer, and they typically limit your time in forbearance to 12 months. While a loan is in forbearance, you aren’t required to make monthly payments but the interest on your loan will continue to accrue (regardless of the loan type). Though you can request a forbearance on your loan as many times as you want, it’s not recommended to do so often. Lenders and servicers may limit how many times you are approved."
[Read the entire article over at CNBC]
All Federal Student Loan Payments Will Be Suspended Through September 30, Due To The Coronavirus
Author Sarah Mimms writes:
"The U.S. Department of Education announced that all borrowers with federally-held student loans will automatically have their interest rates set to 0% for at least 60 days.
All borrowers with federally-held loans may also request to suspend their payments for at least two months, and delinquent borrowers will have their payments automatically suspended. The Department of Education also announced that they have stopped the collection of defaulted federal student loans for at least 60 days.
Here are some key things you need to know about how this may affect you.
Do I need to apply to take advantage of the interest waiver?
No. Federal student loan borrowers do not need to take any action to receive the interest rate waiver. Your federal student loan servicer will waive the interest without any action from you. You do not need to contact your student loan servicer.
Will my payment go down automatically?
No, and your payments will be due as usual unless you contact your servicer. Although your federal student loans are not accruing interest, your payments are set on a schedule and you will not see a decrease in payment amount due. But if you continue to make payments, you will pay off your loans faster because the entire payment will be applied to principal.
If you think you may have trouble making your payments, some of your options are discussed below.
Does the interest waiver apply to all of my student loans?
No. The interest waiver applies only to student loans that are held by the federal government, which are the vast majority of student loans issued since 2010. The interest waiver does not apply to student loans owned by banks, credit unions, schools, or other private entities.”
[Read the entire article over at BuzzFeed]
Worried about your student loans? Here’s what the government is, and is not, doing to help.
Author Danielle Douglas-Gabriel writes:
"The Trump administration gave federal student loan borrowers the option last week of postponing payments for at least 60 days, while automatically suspending the bills of those in delinquency. Even if people choose to continue making payments, the Education Department would still waive interest on their loans for at least two months.
This week, Congress agreed to extend the timeline through Sept. 30 and made the suspension automatic. For those six months, borrowers can postpone their payments without penalty or interest accruing. What’s more, each month would still count toward loan forgiveness for borrowers in public service jobs. It would also count toward student loan rehabilitation, a federal program that erases a default from a person’s credit report after nine consecutive payments.
While this plan could help 95 percent of borrowers with federal loans, it excludes those with federal debt held by private companies. That debt is from the old bank-based Federal Family Education Loan (FFEL) program that ended in 2010 when the Obama administration moved strictly to direct lending. The plan also excludes federal Perkins loans for low-income students that are held by colleges and universities.
People with bank-based federal loans that are not held by the government can consolidate their debt to take advantage of the waiver and payment suspension. But that process could take some time, and unpaid interest will be added to their balance."
[Read the entire article over at the Washington Post]