Student Loans During COVID: What You Need To Know

Written by  //  2020/11/16  //  Academics  //  Comments Off on Student Loans During COVID: What You Need To Know

student loan debt

The student loan crisis does not stop, go away, or even slow down during a global pandemic. Students are still going to school and graduating with debt they do not know how to handle.

If you have big plans for graduating this winter or your student loan payments are set to begin soon, make sure you know how the pandemic affects student loans. Whether loan payments affect you or your child, make sure you learn what you need to know about student loans during COVID before letting the anxiety take over.

The CARES Act and Federal Student Loans

When the COVID-19 pandemic began in March, it was apparent that the government needed to do something for student loan borrowers who faced record unemployment and financial hardships. The CARES Act not only provided a one-time payment of $1,200, but also put federal student loans into an automatic forbearance. This forbearance set monthly federal student loan repayments to $0 without generating interest.

In normal forbearance, all progress towards federal student loan forgiveness halts, and interest continues to accrue. The emergency forbearance counts your monthly federal student loan payments as regular payments towards student loan forgiveness.

Originally, the forbearance was set to end in September of 2020. However, as the pandemic continued, it was clear that the government’s help for federal student loans needed to continue until 2021. Currently, the forbearance ends December 31, 2020—a date that could change as it grows closer, as an end to the pandemic does not seem to be in sight.

Private Student Loans

Unfortunately, when it comes to student loans borrowed from banks or other private loan companies, people may not find relief. Because the government does not control private loan companies, private loans do not need to follow the same CARES Act terms as federal loans.

It is up to you as the loan holder to communicate financial difficulties with the private loan provider and seek their assistance. Some private lenders do provide their own COVID relief, but you need to be careful. You may face hidden fees or penalties for failure to pay off your loan payments—even in the pandemic agreement.

Paying off Loans Anyway During the Pandemic

If you are in a stable financial situation that allows you to meet your monthly payments, the federally mandated student loan forbearance is a perfect time to make a large dent in your total student loan. With no interest, you can take time to pay off existing interest or make genuine progress in your loan repayment effort with no extra costs building up.

Most importantly, what you need to know about student loans during COVID is that while no-interest payments seem enticing, your livelihood is the most important. If your student loans are in forbearance, focus on surviving rather than paying them off. During this very difficult time, you must prioritize yourself.

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