On Friday, March 20th, the U.S. Secretary of Education, Betsey DeVos, announced that the office of Federal Student Aid will be providing relief from student loans during the Coronavirus national outbreak.
How is the Department of Education handling the threat that the Coronavirus national emergency has placed on the financial futures of many?
Relief for the Coronavirus crisis as it relates to student loan debt has been presented in the form of federal loan interest rates being set to zero for the next 60 days and possibly beyond.
Borrowers will also be granted the option to pause their payments while they figure out their finances for these next 60 days at least.
This will give borrowers the flexibility they need to sort through these hard times and prioritize a stable financial future without fear of defaulting on their student loans.
Check out: What happens when you default on your student loans
The focus right now is intended to be on health and well-being. Taking the necessary precautions to keep oneself and family safe without further stressors being a factor.
DeVos expressed, “These are anxious times, particularly for students and families whose educations, careers, and lives have been disrupted.”
DeVos also “commend[ed] President Trump for his quick action on the issue.”
What about forbearance and deferment during the Coronavirus national emergency?
DeVos has directed all federal loan service providers to grant forbearance or deferment to any borrower that holds these federal student loans and requests it during this time.
This retroactively has gone into effect as of March 13, 2020, and will continue for the next two or so months or until otherwise stated.
How do you request forbearance or deferment of your federal student loans?
If a borrower wants to take advantage of the option of forbearance during this time, then they should contact their federal loan service provider directly.
If a borrower fails to do so and goes 31 days delinquent, then that borrower will automatically have their payments suspended which is intended to give a safety net during the Coronavirus national emergency.
Photo by Tim Gouw on Unsplash
Should every student loan borrower take advantage of these special circumstances and payment suspension options?
It is advised that if a borrower can make their payments without trouble that they should still do that on time.
Those who should seriously consider still making payments are those who are seeking Public Service Loan Forgiveness (PSLF), or those who have taken advantage of income-based payment plans and can still manage lower monthly payments.
If continuing to make payments, they will automatically be applied to the principal amount of their loan once all the interest accrued before March 13, 2020, is paid.
The Department of Education is still intending to work closely with Congress as well as all borrowers to receive the support they need regardless of what plan they are following to pay back their federal student loans.
What should a borrower do if they have recently lost their job or are now receiving a lower income?
The best thing a student loan borrower can do is contact their loan service provider and see what options they have.
This could be a payment suspension for the 60 days, or possibly longer, or a lower payment plan that is more manageable.
More details will be released as they are decided upon. Any information, as well as more details, can be found at StudentAid.gov/coronavirus.
What about borrowers who hold private student loans? Do they have the same repayment options during the Coronavirus national emergency?
Unfortunately, there is no government-mandated solution that is being offered to those with private student loans.
Any borrower who does hold private student loan debt should contact their loan service provider for the most up to date information on their loan repayment options and next steps.
Rates for all personal loans are at an all-time low, therefore refinancing student loans could be the best option for private student loan borrowers at this time.
Refinancing your student loans consolidates all your payments into one easy payment and with rates so low, this could mean a lower payment as well as less interest accruing over the life of the loan.
Check out: Why you should refinance your student loans during the Coronavirus crisis