How the CARES Act Impacts Student Loan Payments
Most people associate The Coronavirus Aid, Relief, and Economic Security (CARES) Act with economic assistance for workers, families, and small businesses. However, the new federal law, passed as a response to the COVID-19 global pandemic, can also be helpful to those struggling with student debt. The recent legislation provides automatic suspension of principal and interest payments on federally held student loans through September 30, 2020.
How Should You Manage Student Loans Right Now?
The current fluctuating economy has many college grads wondering how they should manage their loan payments. As a recent college graduate with student loans myself, my advice would be to continue to pay them if you can. Yes, everyone’s financial situation is different; however, if the pandemic is not directly impacting you, now is a great time to make headway on your principal balance without accumulating more interest.
Paying down your student loans now, interest-free, can also have future benefits. If you eventually apply for other loans, for various reasons (house, car, small business), you’ll be glad to have lowered your already existing debt. Lowering your student debt, or eliminating it altogether, can help ensure you get the best rate and terms possible.
Set Reminders on Your Student Loan PaymentsThere are some crucial factors to consider if you continue to make student loan payments during this time. One thing to know is that “automatic” payments aren’t an option at this time. Even if you have direct debit as your payment method and you would like to continue paying during the window that they are suspended, you have to log on and manually select a payment amount.
I try to set a reminder for myself each month to log on and pay the amount that I would typically pay each month. Consistently paying down the principal without interest is what encourages me to keep my typical payment routines. However, it’s important not to create unnecessary financial duress for yourself during these uncharted times. If your financial situation doesn’t allow for your monthly payments, it’s okay to wait until after September to resume paying your student loans.
What do You Need to do to Suspend Loan Payments through September 30, 2020?
Absolutely nothing – as long as it’s not a private loan. Everyone carrying a federally-held loan automatically has suspended payments through September 30, 2020. The federal government holds the majority of loans issued since 2010, but there are private loans out there, which are not necessarily suspended. If you’re unsure how your loans are set up, it may not be a bad idea to log into your account to gather more information about your terms. When you log into your account, you’ll be able to confirm that your payments are suspended until the end of September.
Most importantly, don’t fall for the scams! The federal government will not ask for a fee to suspend your payments. Your loan payments will be automatically put on hold, with no fee.[/vc_column_text][/vc_column][/vc_row]