In April, Congress passed the CARES Act, which provided much-needed relief to millions of student loan borrowers. Those with eligible federal student loans had their interest rates dropped to zero, payments could be put on hold (forbearance), and all collection actions were suspended. Those protections, however, are set to expire on September 30, 2020, if Congress does not extend them soon.
No Student Loan Relief Compromise in Sight
House Democrats would like to give borrowers an additional 12 months of payment relief, as well as 0% interest on their student loans. They have also requested $10,000 in student loan forgiveness for every borrower – private and federal. Although the HEROES Act passed the House in May, Senate Republicans are against many of the provisions and unveiled their own stimulus package last month. The GOP plan does not extend any student loan relief provided under the CARES Act but seeks to simplify the federal student loan repayment system. Democrats and Republicans agree that a stimulus package is needed. Unfortunately, they have been unable to find common ground in regards to future student loan relief measures. President Trump has indicated that he may be willing to extend the CARES Act provisions, but there is no guarantee at this time.
Your Student Loan Relief Options
While Congress continues to debate what should be included in the next relief package, millions of student loan borrowers will begin to receive notifications from their lenders that payments will resume soon. If you’re facing financial hardship or were in student loan default before the COVID-19 crisis, don’t panic. Even if Congress fails to extend any of the current relief measures, you still have options.
Are you currently unemployed or had a recent reduction in salary? An income-driven repayment plan can help. There are several options available, but the most common is the Income-Based Repayment (IBR) Plan. Under IBR, your payments may be as low as $0 per month, but never more than 10% (new borrowers) or 15% (previous borrowers) of your discretionary income. The following types of federal student loans are eligible for IBR:
- Direct Subsidized and Unsubsidized Loans
- Direct Graduate PLUS Loans
- FFEL Consolidation Loans
- Direct Consolidation Loans
To see how low your payments might be under an IBR plan, check out our IBR calculator. If you’d like to switch to an IBR plan, you’ll need to complete the necessary paperwork and recertify each year. If you’re already in an IBR plan, don’t forget that you can request a recalculation of your payment if you recently lost your job or had a reduction in income.
Forbearance or Deferment
If you’re still unable to make payments after September, you don’t need permission from Congress to request forbearance or deferment from your student loan servicer. These options are available to all student loan borrowers. Simply reach out to your lender before the end of September to request more time. Keep in mind that deferment and forbearance will impact your loans differently. It’s important to ask your lender how each will affect your specific loans before deciding which option is best for you.
Student Loan Rehabilitation
Although student loan collections are currently on hiatus, that will change very soon. If you were in default before the coronavirus pandemic, don’t continue to ignore your student loan debt. Now is the perfect time to get into a student loan rehabilitation program. Federal Direct and FFEL loans are eligible for this 10-month program. Simply make nine consecutive payments, in the agreed-upon amount, and your loan will be restored to good standing. If your wages are being garnished, this will end after your fifth payment. Upon completion of the program, the defaulted loan will also be removed from your credit history.
Private Student Loan Help
Private student loan borrowers have fewer relief options than those under federal student loans. Given the current climate, however, more private lenders are willing to temporarily stop or reduce your monthly payments due to financial hardship. Reach out to your loan lender soon to determine what student loan relief options may be available to you.
Get Help Now, Not Later
Most borrowers would love to receive student loan forgiveness or some other type of student loan relief. Since there is no guarantee that Congress will come to any type of compromise soon, it’s best to start working on a plan to handle your upcoming payments now. To learn more about your available options, contact MoneySolver for a free consultation today!