What are my options for dealing with student loans during COVID?

In March, 2020, the United States enacted the CARES Act which contained a number of provisions to help Americans through the Coronavirus Pandemic.  The CARES Act provides for the forbearance of federally-guaranteed student loans.  Student loan forbearance is when the student loan servicer (who you pay the student loan payments to each month) allows you to pause or suspend making payments on your loans for a period of time.  Unlike the mortgage forbearance provisions discussed in a prior post, the payments missed during this forbearance period don’t need to be made up in addition to future payments, but are simply paused.  During the forbearance, no additional fees, costs, penalties or additional interest can be charged.

The CARES Act automatically granted an administrative forbearance, temporarily allowing borrowers to stop making monthly payments of principal and interest on all federally-guaranteed student loans through December 31, 2020.  This forbearance is without penalty and with interest accruing at 0% during this period.  This is an automatic forbearance, but borrowers may opt out of this forbearance and continue making payments.

The CARES Act also suspended debt collection on federal student loans in default and suspended negative credit reporting for eligible student loans in forbearance.

If you have student loans and are able to make payments during this forbearance, it would be wise to do so—the student loans are not accruing any interest during this time, so any payments you make will be applied directly to principal.

Note that the above-listed provisions in the CARES act only apply to federally-guaranteed student loans, and do not apply to private student loans.  Clients have reported that some private student loan servicers have offered a willingness to work with borrowers on repayment of private student loans.  To find out whether your private student loans have any options for altering repayment during COVID, you should contact your lender.

If you have questions about your options for dealing with your student loans, especially private student loans, contact Prescott, Pearson & Tande, PA.

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