Student Loan Payoff Plan
Your federal Student Loan Payoff Plan got a little help from the Coronavirus Aid, Relief, and Economic Security Act (CARES). While there is no debt forgiveness, the CARES Act will give you a break from payments and the accrual of interest for certain Federal student loans until September 30, 2020. Read on for the details on how the Coronavirus Stimulus package will affect your Student Loan Payoff Plan.
Student Loan Payoff Plan
Your student loan payoff plan may be changed by the new Corona Virus Stimulus CARES Act. I have listed the main parts of the act below that will affect you and your loans.
THE CARES ACT ONLY APPLIES TO FEDERAL STUDENT LOANS
The first thing to understand is that the CARES Act's provisions only apply to Federal Student Loans. Some older federal loans are excluded, including Perkins Loans and commercially held Federal Family Education Loans. If any of your loans are private, you must maintain your normal payment schedules for those loans. Private lenders are under no obligation to delay payments of the accrual of interest.
No Payments Until after September 30, 2020
The CARES Act allows you to stop making payments on your federal student loans until after September 30, 2020. If you are able to continue making payments, if may be a good idea to continue so that you will pay off your debt as you had previously planned. If, however, you are experiencing a financial hardship, you will be able to temporarily stop making payments without penalty.
Interest will stop accruing until after September 30, 2020
No interest will accrue on your loans until after September 30, 2020. So, if you stop making payments, your balance will be exactly the same on October 1, 2020 as it is today. If you are able to make payments at your regular rate, this is also good news, because all of your payments will go to principal, which will help reduce your balance faster and pay off your loan sooner.
Skipped Payments still count toward Public Service Loan Forgiveness
If you are pursuing public service loan forgiveness, the skipped payments will count as part of your required 120 monthly student loan payments.
Employer Loan Payments
Your employer can now pay up to $5250 of your student loans as an employee benefit tax-free.
No Collection of Student Loan Debt
The CARES Act stops garnishment of wages and the reduction of tax refunds and Social Security benefits for the repayment of defaulted federal student loans.
Your Automatic Payments will Cease
You do not need to contact your lender to stop your automatic payments. They will stop them for you. If you wish to continue to make payments, contact your lender and find out the best way to continue making payments.
The Coronavirus Aid, Relief, and Economic Security Act has some great news for those facing economic hardship including the repayment of federal student loans. Be sure to contact your lender if there is any doubt that your loans qualify – some may and some may not. You may still owe payments on some loans and not on others. Absolutely DO NOT STOP MAKING YOUR PAYMENTS unless you are certain that your loan qualifies. If you are not facing financial hardship, use this time to make some ground on your student loan payoff plan. Every dollar you pay will go straight to the principal of the loan.
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