The CARES Act is a $2 trillion financial stimulus legislation signed into law on March 27, 2020 covering everything from rent and mortgage relief options, to small business and income support, delays in taxes, and student loan relief. Today we are looking at the key things you need to know about federal student loan relief under the CARES Act, what you need to know about student loan forbearance, and whether or not you should continue paying your student loans during this time. We'll also look at relief options from schools, for private student loans, and what you need to know about employer sponsored student loan repayment programs.
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Table of Contents
What You Need To Know About Student Loan Relief During Coronavirus + How To Get It
- Key things you need to know about federal student loan relief under the CARES Act:
- What you need to know about student loan forbearance:
- Should you keep making payments towards your student loans during forbearance?
- How to get your student loan relief under the CARES Act
- Private student loan relief
- School level student loan relief efforts:
- Should you refinance your student loan?
- What if you can't pay for your student loan after the pandemic relief period?
- Do I still need to pay taxes on my employer-sponsored student loan repayment program?
Key things you need to know about federal student loan relief under the CARES Act:
- Automatic forbearance (delaying of payments) from March 13, 2020 to September 30, 2020
- Automatic waiving of interest on your student loan
- No garnishment of wages, social security, or tax refunds for those in default of their student loan payments
The CARES Act does not cover private student loans, we'll talk about those later in this post though.
Visit studentaid.gov to see who your loan holder is. You should receive these benefits if the Department of Education is listed.
What you need to know about student loan forbearance:
Forbearance is a postponement. Meaning you will still be expected to make those payments. Since everything is getting delayed by six months Under the CARES Act, your original final payment date is likely extended by six months as well.
From March 13, 2020 to September 30, 2020 no payments on federally held student loans will be due and your loan will not incur any interest during that time (not typical for forbearance).
In addition, forbearance does not affect your credit score, but it will show up on your credit report. You can read more about the impacts of forbearance and credit here from Lexington Law.
Can/should you keep making payments towards your student loans during forbearance?
You can continue with your regular payments during forbearance if you'd like to get ahead. You can pay the regular payment, or a smaller amount during this time. All auto payments are supposed to be automatically stopped during this time, so you may need to continue with them on your own and contact your student loan servicer. Keep good records proving you continued payments.
Or you can choose not to continue your payments and use this time to get money into an emergency fund or paying off higher interest debts like with your credit card. Use this time to set yourself up with a stronger financial foundation for success.
How to get your student loan relief under the CARES Act:
Everything is automatic for your federal student loan so you do not need to do anything other than keep an eye on your accounts. If you notice any errors, just make a mental note to check back on them. These changes will be made retroactively to March 13, 2020. If you need to request a refund for any payments you may have made or wages they may have garnished since March 13, 2020 contact your student loan servicer.
If you are continuing with your payments during the forbearance period, you should contact your student loan servicer.
Private student loan relief
Private student loans are not covered under the CARES Act. However, private student loans often offer a 12+ month period of forbearance or similar policies. Unlike with the CARES Act, you will likely need to continue paying interest during forbearance.
You will need to contact your student loan lender in order to learn about relief options. Make sure to ask about deferring payments, interest free periods, waiving and refunding any fees, etc.
School level student loan relief efforts:
To date, the Department of Education distributed over $6 billion in funding for emergency grants to help students in need. Contact your financial aid office to learn how your school will be distributing these funds and if you qualify for any additional relief.
Many schools are refunding housing, meal plans, and other campus fees. These are unique to each individual school, so contact your college or university's financial aid office to see what policies have been put in place.
Should you refinance your student loan?
Interest rates on loans have been declining overall in 2020. Refinancing your student loans at a lower rate could save you money.
However, you may only want to consider refinancing your student loan if you: have a steady income, strong credit score, and a privately held student loan policy.
A word of caution for federal student loan holders: If you do refinance, you may lose out on any pandemic relief programs currently in place, like interest free forbearance and income driven repayment plans. You could also miss out on future programs put in place.
What if you can't pay for your student loan after the pandemic relief period?
Discover several student loan repayment options available to you here from the professionals at Lexington Law.
The income-based repayment plan will most likely be your best option during this unstable time. This plan is based on your current income, family size, and bills. Meaning, payments may be as little as $0. Learn more about how it works here.
If you were already on an income-based plan and your income has changed, request a new payment amount and provide proof of the change in your financial circumstances.
Do I still need to pay taxes on my employer-sponsored student loan repayment program?
Historically, if an employer contributes to repaying your student loan that money is treated as taxable income. However, thanks to the stimulus package, you will not pay taxes on employer sponsored contributions towards your student loans up to $5,250 through January 1, 2021. Speak with your employer to see if they offer a program like this.
You can learn more about the resources available through the CARES Act here from Lexington Law. I know this is an unstable time for many. But I believe one of the fastest ways to recover financially during this time is to dive head first into your financial situation. Get a clear picture of what is going on, learn what programs are available to you for relief, and take advantage of them. This is the time to accept help and clean things up to the best of your ability. Contact Lexington Law Firm for your FREE credit report consultation here. Ensuring an accurate and up to date credit profile can save you money and paint you in the best light when talking with lenders.
Check here for most up to date info on student loan relief options under Coronavirus from the Department of Education.