On March 27, 2020 the CARES Act was signed into law, which among many things, provided temporary student loan relief. This relief is only for federal student loan borrowers whose loans are held by the US Department of Education. This is an important point. Any private student loans are not affected by this Act, and continue to remain collectable.
The CARES Act took two actions when it comes to federal student loans.
- It lowered the interest rate to 0% from the period March 13, 2020 to September 30, 2020. During this period no interest will be charged on your loans.
- It placed federal student loans into an administrative forbearance from March 13, 2020 to September 30, 2020. This means you are not required to make a monthly payment on your loans during this time. All federal loans will report as current to the credit reporting agencies for this period.
An important note regarding student loan payments in this 6 month period. If you do choose to make a voluntary payment during this time the full payment will go towards principle. For many this will be an opportunity to pay down your loans more quickly than when interest is charged. If you are able to afford to make a student loan payment still, it is in your best interest to continue payment.
If you are not able to continue to make the payment, you will not be negatively affected. If you are in the Public Student Loan Forgiveness program the 6 months of non payment will still count towards the program.
What is important to note is the above is all temporary. Come October 2020 your monthly payment will again come due and interest will begin accruing again. For this reason as well, it may be beneficial to not get out of the habit of paying your student loans if you are still able to.
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If you are struggling with student loans and other debts and COVID 19 has negatively affected your finances please reach out to Kain and Scott www.kainscott.com to develop a plan moving forward.
