Student loan relief could be on the way thanks to some coronavirus relief programs.
The average monthly student loan payment is around $400. At the same time, interest hovers around 5.5% — a hefty price for those who might currently be out of a job and struggling to pay their bills due to coronavirus restrictions.
If you find yourself in a situation where making your student loan payment is difficult, there are a few steps you can take to seek relief.
Government Student Loan Interest Waivers & Stimulus Package
As COVID-19 shuts down jobs all across the country, individuals are struggling to pay off their student loans. Last Friday, the Trump administration announced it would waive interest on federal loans until further notice.
It’s a stark contrast to what has been done during national emergencies in the past, and also showcases just how dire the situation could be economically, especially for people that hold a large amount of debt in the form of student loans.
We are still waiting on information as lenders get more guidance from the Department of Education regarding specifics of the process. But here’s what is important to know right now:
- You do not need to apply for interest waivers — they will be applied to your loan automatically
- All federal student loans will be eligible for interest waivers. Private loans are not eligible
- This could save you money should you decide to apply for forbearance or deferment at the same time
Keep checking back with the Department of Education regarding financial assistance for students affected by COVID-19.
The recently passed stimulus package is suspending all student loan payments and waiving interest until September 30th, 2020. You can read more here.
Forbearance or Deferment
If you’ve been significantly impacted by the closing of your job or limited hours, it may be possible for you to talk to your loan provider about forbearance or deferment.
These options could allow you to stop paying on your loans for a period of time. With the interest waivers, now is the best time to take advantage of one of these programs if you are eligible to do so.
Here is more information:
- What is Forbearance?
- What is the difference between Deferment and Forbearance?
- How do I apply for Deferment or Forbearance?
Change Your Repayment Plan
If you’ve experienced a loss of income, consider applying for an income-based repayment plan for any of your federal student loans. Depending on your situation, this could mean your payments are as little as $0 a month.
Here is more information about income-driven repayment plans:
- Income-Driven Repayment Advantages & Disadvantages
- How to apply for Pay As You Earn (PAYE) Plan
- How to Pick the Best Debt Repayment Plan
Refinancing Your Student Loans
Federal interest rates have dipped due to the economic downturn in light of COVID-19. For many, that means lower interest rates for things like refinancing student loans.
While taking advantage of lower interest rates is smart for private loan holders, if you have federal student loans, you could lose out on their benefits by refinancing.
Refinancing a federal student loan means you lose benefits like:
- Flexible repayment options including income-driven repayment plans
- Postponement opportunities like forbearance or deferment
- Student loan forgiveness after consistent on-time payments
- Longer period of time before your loan is considered in default
It is essential to consider your options and talk to a financial advisor before making any major decision regarding your student loan. If you have a private student loan, speak to your lender about how refinancing might help the future of your student loan.
The COVID-19 pandemic is impacting our usual way of life, and things are changing by the minute. Keep checking with the government and the Department of Education regarding student loan relief benefits that might be made available to you.