What Extended Student Loan Repayment Relief Means to You | Education
You guys, we all know 2020 has been crazy. But here’s the good news: You may not need to pay off a student loan until October of this year, as the student loan relief under the CARES Act has been extended until September 30. Let’s talk about what that actually means so you know what’s going on, and so you can take that student loan debt out of your life for good.
Question: What did the CARES law do?Answer: The CARES Act (or Coronavirus Aid, Relief, and Economic Security Act) was a stimulus bill passed by Congress at the start of the COVID-19 pandemic to help the economy (and many Americans) recover working. . The CARES Act offered a temporary suspension of payments, a 0% interest rate on student loans, and a suspension of all collections and wage garnishments – or money taken from the borrower’s paycheck for repay the loan – on delinquent loans.
After it expired, then-President Donald Trump extended student loan relief until January 31. But now that President Joe Biden is in office, he has extended it again until September 30. So what does this mean for you and your loans?
Q: What will the extended student loan payment relief do?A: First, let’s clarify something: this is not the same as a student loan forgiveness plan. You will still have to pay the full amount of your student loans, unless another policy or relief program is put in place.
The basic idea behind this extension is that student loan interest rates will stay at 0% and payments on all federal student loans will be suspended until the end of September. These types of loans are included:
- Direct subsidized loans
- Direct unsubsidized loans
- Direct PLUS Loans
- Direct consolidation loans
- Federal Perkins Loans (if not from the university you attended)
- Federal Family Education Program (FFEL) loans (if not commercially owned)
And get this: If you have these types of federal student loans, you’re already included – you don’t have to sign up or fill out any paperwork. Pleasant! But it’s a good idea to check the Federal Student Aid website to verify that your loans qualify.
Q: How the extension affects different lending situationsA: If your loan situation is different from the typical federal student loan repayment process, let’s break down the impact of this extension on you. Here are some potential scenarios:
- Default: If your loans were in default (that is, you didn’t make payments on time) before COVID, this extension will give you the chance to get caught up. You can do your best to make these late payments without having to make new ones!
- Utility Loan Forgiveness: If you are in the process of qualifying for this type of loan forgiveness and are still able to work and make payments, please be aware that any payments you make during this time will be still counted in your 120 necessary payments. Take advantage of the 0% interest rate and keep paying off your loans.
- Private student loans: If you have taken out private student loans, this extension does not apply to you since your loans do not come from the federal government. But it’s always worth talking to your lender and asking for an extension or some other type of plan if your finances have taken a hit.
It’s always a good idea to check with your lender to make sure you still meet all of the requirements and see if there is anything else they can do to help you during this season.
Q: What you can do to pay off your loansA: Remember that the extension will not get rid of your debt. It will just lengthen your repayment period and (hopefully) help you if you are in financial difficulty. Times are tough, but if you can put a solid plan of action in place, you can get rid of those student loans faster than you think.
Here are some practical steps you can take to pay off your loans based on your current financial situation:
- If your income is stable, continue to crush your monthly student loan payments. Pay more than the minimum payment if you can! Or, if you are using the debt snowball to pay off your debts from smallest to largest and have smaller debts to eliminate before your student loan, you can use the money you would have used to pay off. your loans to get rid of. your small debts faster during this period. Whatever you do, keep your debt attack mind!
- If you have an income at risk, save an emergency fund of $ 1,000 as soon as possible and continue to make minimum payments on all your debts. If you are in a very difficult situation, put your student loan payments on hold during the extension period and save whatever extra money you have until you are able to earn a more solid income.
- If you’ve lost an income, try to stay calm, pause your snowball debt, and make covering the four walls (food, utilities, shelter, and transportation) your top priority. Pick out what other jobs are available, sell what you can, and save any remaining money until you get back on your feet.
- If you have more than one student loan, you might want to consider consolidating and refinancing them, but only if the refinancing won’t cost you anything, you can get a lower fixed interest rate and you don’t get. no longer repayment period. This way, you will have more money available to continue tackling your debt.
Let’s face it, this is a really strange time. But I know you can go through and come out stronger on the other side.
Anthony ONeal is a national bestselling author, financial expert and host of the popular online series “The Table” on his YouTube channel. He has appeared on Good Morning America, The Tamron Hall Show, The Tom Joyner Show, and Rachael Ray, among others. Since 2015, Anthony has worked at Ramsey Solutions, where he teaches young adults how to budget, live debt free, avoid student loans and create real wealth for their future. Follow Anthony on Twitter, Instagram, Facebook and YouTube or online at anthonyoneal.com.