All across the nation and around the world, many are facing financial difficulties due to the sweeping effects of COVID-19 can lead to furloughs and layoffs as well as reduced salaries, and loss of opportunities.
These are difficult times for people with outstanding debts that increase regardless of the economic slowdown. For those 5.2 million who are paying for student loans, there’s assistance and hope for a positive result. It is the CARES Act, one of the federal stimulus programs designed to stabilize the economy and help workers, provides relief to students and borrowers of student loans.
Here are a few essential resources provided by this new law.
What is the CARES Act Impacts Student Loans
The CARES Act provides financial relief for federal students who are borrowers of student loans which includes those who have Direct, Direct PLUS, Direct Consolidation loans and FFEL or Perkins loans that are owned through the Department of Education. Furthermore this CARES Act applies to all federal student loans, including those that are in default. This means that borrowers struggling at every level can benefit from these student loan benefits contained in the CARES Act.
Students who have federal student loans are granted an automatic administrative forgiveness on loans from February 13, 2020 to September 30 in 2020. This means that for this time the borrowers do not have to pay their loans or auto-draft is disabled. Furthermore, the rate of interest at this point is zero percent, which means interest will not be accrued during the period of forbearance.
FFEL Program loans owned by commercial lenders as well as Perkins Loans which are owned by academic institutions don’t meet the requirements of the CARES Act. However there is the possibility to consolidate these loans into Direct Consolidation Loans that will be eligible to receive the forgiveness. Perkins loans offered by universities might also be eligible for a 90-day delay and borrowers are advised to inquire with their institutions for specific information.
Private student loans aren’t suitable and private loan borrowers should read their loan contract and call their service provider to inquire about alternatives to hardship such as deferment, forgiveness or loan modification.
The Chance for Defaulted Borrowers is Great
One of the most significant benefits that this plan offers is that it provides benefits to students in default. In the period of forbearance, administrative garnishments on wages as well as tax refund offsets as well as Social Security benefit offsets will be suspended. Likewise, the stimulus check won’t be subject to offsets either.
Rehabilitating loans is often the best option to avoid default. The typical defaulted borrower agrees to a reasonable arrangement of payments with their servicer. It can be as low as $5 per month in certain situations. After the agreement is signed that the borrower makes the loan in nine monthly installments in order to be released from default. According to the CARES Act, the months of forbearance in which borrowers make zero-dollar payments be counted towards rehabilitation payment, and the interest is not charged during the period of forbearance.
This is among the most exciting opportunities for borrowers who have defaulted to start the journey towards settling their debts. If you’ve defaulted on loan for student debt, do not hesitate! Call your servicer now to inquire for a rehabilitation plan.
An Opportunity to Make Savings
For borrowers of student loans who are experiencing an income crisis, this time of administrative forbearance may provide the flexibility to manage their finances which allows the borrower to prioritize things like rent or mortgage, food utility bills as well as child care and other basic needs. Consumers can put the money that otherwise would go towards student loan payments to prioritized expenses.
The borrower can also reach out to their other creditors to inquire about the availability of hardship plans or deferments for mortgages and credit cards to ensure that they can allocate their available funds or savings to the greatest needs. In the end, everyone is benefited in the event that borrowers are able to access the funds they need to meet their obligations, and lenders are eager to ensure their clients’ long-term success feasible.
If you’re not facing financial difficulties the period of administrative forbearance is an ideal opportunity to invest money in creating or expanding a $1000 emergency savings account and later, to pay down principal on student loans. If a borrower is able to make an unintentional installment of a loan for a student, then the whole amount will go towards the principal reduction after payment of the interest that accrued before the 13th of March 2020. This is an excellent option to speed up loan payoff, cut back on interest and lower the amount of money that is repaid.
If you are enrolled with Public Service Loan Forgiveness (PSLF) The administrative forbearance time will be counted in their eligibility for 120 payment in the event that they are employed full-time with an employer that is a qualifying one and in a repayment plan that is qualified. In this case it might not be a good idea for borrowers to make additional principal payments on their student loans and instead, they could profit from contributing to emergencies and paying off other debts of the consumer.
Making Contact HEERF Grant Opportunities
Another aspect of the CARES Act provides a grant possibility for students who are currently enrolled regardless of whether they are loan borrower or not. Students who have incurred costs in connection with the COVID-19 disruption of campus operations could be eligible for grants from the Higher Education Emergency Relief Fund (HEERF) Student Share.
The grants will be disbursed by the financial aid offices. Therefore, students must seek the information at their universities or call the office for financial aid to make an application. These expenses can be categorized as being related to costs of attendance like food, housing and course materials, as well as healthcare, technology and childcare. This is a grantand not a loan. Therefore, students won’t have to pay back any funds granted for legitimate reasons.
Take Action ASAP
For more information, borrowers are able to go to their local Department of Education website for a complete listing of resources. If you need assistance in dealing with mortgage or credit card debt, contact our certified experts at any time. We offer access to certified financial counselors with the knowledge and experience needed to assist you in improving your financial situation.
