Coronavirus Relief: Congress Suspends All Federal Student Loan Payments Until 30th September
As the US economy continues to take a battering from the coronavirus, we’ve seen the Federal Reserve and Congress up the ante in their attempts to soften the blow to the economy.
We’ve all heard the words “unprecedented times” in recent weeks and it’s certainly hard to argue with this when we’ve seen aid packages totaling more than $2 trillion approved by Congress.
Relief measures so far have included:
- A $1,200 payment to all adults earning up to $75,000 per year
- Unemployment payments to be boosted by $600 per week
- The tax filing deadline has been pushed back to July 15th from April 15th
- A $500 billion lending program to businesses
- Paid sick leave for individuals and families
- $117 billion in extra funding for hospitals
But what about your student loans? With 44 million Americans still saddled with student loan debt, now totaling more than $1.5 trillion, this current crisis has put many in the position of being unable to keep up with repayments.
We break down everything you need to know about federal student loan relief.
The good news is that anyone paying back a federal student loan will have the option to completely suspend payments until at least September 30th, 2020.
The Department of Education hopes that this will help people focus on staying safe and well without having to worry about hefty loan repayments.
However, you need to bear in mind there are a lot of exceptions and these only apply to federal loans, the bill doesn’t include relief for private loans, some Federal Family Education Loans (FFEL) and some Perkins loans. If you have a commercially held loan you’ll have to contact the provider directly to see if you’ll get any relief.
You should also note that suspending your federal loan payments is completely optional. If you’re able to keep up your payments you can do so.
However, payments will be automatically suspended so you might have to contact your federal loan provider to make manual payments.
Whether you choose to suspend your payments or not during this period, your Public Service Loan Forgiveness won’t be affected. This is a program in which once you’ve made 120 on-time payments, the remainder of your debt is canceled. Your credit score will also remain unaffected if you choose to suspend payments.
In addition, student debt collection has been canceled for the period. This means that no deductions will be made to your salary, tax refunds or social security benefits if you’re in default.
One final thing to remember is that this is only a suspension of payments, not a cancellation. If you choose to suspend you’ll still owe the same amount once the crisis is over.
Interest payments will also be suspended until September 30th, 2020. The rates will automatically be set to zero and you’ll accrue no new interest in this period. This means that any payments you decide to make will be completely interest free and will go fully against the principal of your loan.
In fact, if you’re no longer eligible for Public Service Loan Forgiveness, you may want to make overpayments if you’re able to take advantage of this interest-free period. This could be a perfect opportunity to pare down your loan principal without suffering any interest payments, so it’s definitely worth considering.
However, as with the payments themselves, this relief only covers federal loans, not private or commercial.
Do I Have Other Options?
There have been several proposals making the rounds of Congress that aim to do more than just suspend payments.
Senate Democrats, for instance, proposed a plan that would cancel $10,000 of loan payments for all borrowers.
House Democrats meanwhile proposed this figure should be even higher at $30,000.
However, as things currently stand, none of the relief packages so far offer any kind of cancellation or forgiveness of student debt and this is looking even less likely as time goes on.
It remains to be seen whether the suspensions of payments and interest will be enough to soften the blow to the economy or if more could have been done.
- All federal student loan payments suspended until September 30th, 2020
- All federal student loan interest payments suspended until September 30th, 2020
- Payments will be automatically suspended. You don’t need to do anything
- Borrowers have the option to continue making payments against the principal during this time
- Private loans, some FFEL, and some Perkins loans are not covered
It’s always wise to pay off any debt as quickly as you’re able, and student loans are no different. If you’re lucky enough to be in a stable position with a steady income during this crisis, then we definitely recommend continuing to make payments to your federal student loan. As interest payments have been suspended, this presents an opportunity to pay down your principal without suffering those additional interest costs.
However, for those who might be struggling with federal student loans at the moment, this presents a good opportunity for some temporary relief. While your payments should be automatically suspended, it may be worth getting in touch with your provider to make sure your loan is covered and payments will definitely stop.
Finally, if you’re one of the unlucky ones whose loans aren’t covered by the relief, you should get in touch with your loan provider as soon as possible as they may have their own options for deferment or debt consolidation.