In case you missed it, there have been major changes regarding your student loans. President Donald Trump signed the CARES Act, which includes a $2 trillion stimulus package in response to the Coronavirus health emergency.
Among other benefits, the CARES Act has major implications for the way you pay your student loans, think about student loan forgiveness, and manage your money during Coronavirus.
Fortunately, let’s make it easy for you and put all the updates in one place so you’re up to speed. Here are the major changes:
President Donald Trump signed the CARES Act, which is a $2 trillion stimulus package that provides economic relief as a result of COVID-19. The CARES Act includes several benefits for your student loans, which are intended to help you manage your money due to the coronavirus emergency. Among other benefits, the CARES Act provides:
1. Stop paying your federal student loans through September 30, 2020.
That’s not a typo. You can stop paying your federal student loans through September 30, 2020.
What This Means: This means that you have the option to stop paying your federal student loans. If you choose this option (and you don’t have to), you will not face any penalties or late fees.
What This Doesn’t Mean: This doesn’t mean you can stop paying all your student loans. Remember, this is only for federal student loans that are owned by government agencies such as Direct Loans. However, this does not include private student loans or FFEL Loans.
What This Means: This is not a typo either. Through September 30, 2020, no interest will accrue on your federal student loans. This means that for this period, the interest rate will be set to 0% and no new interest will accrue on your federal student loan balance.
What This Does Not Mean: This only applies to federal student loans only, not private student loans or FFEL Loans.
3. Student loan debt collection has been halted.
What This Means: This means that wages, tax refunds and Social Security benefits will not be garnished during this period to pay for federal student loans. Trump previously stopped student loan debt collection for 60 days.
What This Doesn’t Mean: This does not mean the federal government is forgetting about student loan debt that is in default. Rather, the federal government has suspended student loan debt collection during this period.
4. Pausing student loan payments won’t negatively impact your payments for student loan forgiveness.
What This Means: If you choose to pause federal student loan payments during this period, the federal government will still count these “payments” (even if you don’t make any) as part of any required federal student loan forgiveness program, including public service loan forgiveness.
What This Doesn’t Mean: This doesn’t mean that you will hurt your chances to qualify for public service loan forgiveness because the 120 payments do not need to be consecutive.
1. If I don’t have to make federal student loan payments, is the federal government paying my student loans for me?
No. Your federal student loan balance will not change. Consider this a break from student loan payment. However, no one is paying your federal student loans during this period.
2. Is all my federal student loan interest being waived?
No, your existing federal student loan interest will remain. The only portion that is being waived is new student loan interest that would have accrued on your federal student loans through September 30, 2020.
3. Can I still make federal student loan payments if I want to?
Yes, you can still make federal student loan payments. Even though your interest rate is 0%, your monthly student loan payment unfortunately will not be lower. Rather, your student loan payment can help pay off your existing student loan balance (since there is no new interest accrual).
4. So, how much student loan forgiveness will I get?
Many borrowers ask, “What should I know about student loan forgiveness and Coronavirus?” Senate Democrats proposed a student loan forgiveness plan that would forgive at least $10,000 of federal student loans for all borrowers. House Democrats proposed that every borrower receive $30,000 of student loan forgiveness. Former Vice President Joe Biden supports $10,000 of student loan forgiveness, although this new plan differs from Sen. Elizabeth Warren’s original student loan forgiveness plan to cancel student loan debt. Despite these proposals, the CARES Act does not include any student loan forgiveness.
5. I checked my student loan servicer’s website and it says that if I stop making payments on my federal student loans, I won’t qualify for public service loan forgiveness. This must be wrong.
Since this legislation is new, many student loan servicers have not yet updated their website to reflect these updates. (Also, make sure you know how not to get disqualified for student loan forgiveness).
Remember, this announcement applies only to federal student loans (not private student loans).
Continue on to Forbes to read the complete article.