|Trying to put the pieces together|
In many cases, student loan debt is the largest debt a person has. With student loan debt averaging over $37,000 per borrower, we can certainly understand why figuring out a way to relieve the stress of paying back this debt was part of the signed relief bill passed on Friday (3/27). There are a few key changes everyone should be aware of and more possible changes in the future to provide borrower relief.
Coronavirus Relief Bill
For starters, the bill suspends all payments from being due for the next 6 months. This means you will not be penalized for not making your student loan payments. It will not hurt your credit or keep you from qualifying for forgiveness in the future. The stop of all payments will continue until Sept. 30th, 2020 (effective immediately). This also means that those who have been in default will not be collected on, their wages will not be garnished, and they will not have their tax refunds taken. There is no clear word yet if those who have already lost their tax refund will be able to get it back. Once I get official confirmation I will let everyone know. Please understand the stop of payments is only for Direct Federal Student loans. Those who have Perkins loans, FFEL loans (Federal loans disbursed before Oct. 1, 2007), or Private loans will have to continue to make payments. This makes up about 9 million people.
Another temporary relief is the interest rates of all federal loans have been set to 0% for 60 days (beginning March 20, 2020). This means no interest will accrue on your student loans during that time frame. For those still paying on their loans, all payments made will go to the principal during this time. If the crisis continues we can hope that they extend this zero interest benefit to borrowers to allow for additional relief.
The world has been shaken to its core by this crisis. Thanks to this relief bill, students and those with student loans will have a chance to concentrate on other issues during this hard time. However, those who can afford to make their payments, I suggest they continue to do so. Making extra payments while taking advantage of the 0% rate will go a long way to reduce the principal balance and pay off the loans sooner.
For those who do have Perkins or FFEL loans, there are options to still qualify for the six-month reprieve. The loans will need to be adjusted to Direct Federal loans through a consolidation process. Those seeking assistance in consolidating their FFEL and/or Perkins loans can contact Degrees of Success. I can assist in completing all the required consolidation documentation and work with the lenders to maintain a temporary postponement until the loans are officially Direct Federal Loans.
The House has proposed further relief by asking for $10,000 in payments to be made per loan for federal student loan borrowers. Unfortunately, the proposed legislation has not passed at this time. We are hopeful that if the pandemic continues this bill will get passed in the future. Anyone who owes less than $10,000 would have their remaining balance paid off.
For additional assistance, please contact Degrees of Success. On the website, you can send a question via email or schedule a call to discuss your situation in further detail. Please continue to stay safe and hopeful that this crisis will pass. Please know I am here to assist you in managing your student loans to relieve you of the stress of going it alone. You are not alone!
Dr. Genevieve Dobson, DBA
Founder & CEO
Degrees of Success
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