Posted by Telesky Financial Services

Everything You Need To Know About Student Loans During Covid-19 Pandemic

Everything You Need To Know About Student Loans During Covid-19 Pandemic

There is so much misinformation now on what to do with student loans during the coronavirus emergency. Let's clarify things. This is what you need to know.

Student Loans: Coronavirus

It is time to end the mess. Here is a really quick and bogus guide to making sure you understand all of your student loan options.

I don't have to pay interest on my student loans: This is false! President Donald Trump temporarily waived all interest on federal student loans for 60 days. Interest relief is automatic, so you don't need to register with the student loan administrator. However, interest on private student loans still needs to be paid.

I can stop paying my student loans for 60 days: This is true. If you want to know how to suspend student loan payments for 60 days without penalty, contact your federal student loan administrator to request an administrative stay. Like interest relief, this only applies to federal student loans (not private student loans) managed by an agency of the federal government. If you are unsure if your student loans are eligible, contact your student loan administrator to confirm.

I don't have to stop paying my student loans now: This is true. There is no need to suspend student loan payments for 60 days; it's completely optional. You can still pay your monthly student loans, but the amount of the monthly payment will not change. Even if interest rates are set at 0%, full payment will only apply to the principal balance once all interest on the student loan has been paid before March 13, 2020.

I will be forgiven for a student loan due to the coronavirus pandemic: This is false. Currently, there is no forgiveness for student loans due to coronavirus. This does not mean that there is no proposal to repay the student loan debt. For example, House Democrats have proposed that each borrower receive a $ 30,000 grace loan for the student loan.

The Democratic Senates have launched a student loan forgiveness plan that would forgive at least $ 10,000 in federal student loans to all borrowers. Former Vice President Joe Biden is asking for $ 10,000 to cancel the student loans. Senator Elizabeth Warren (D-MA) has proposed the cancellation of student loan debt for 95% of Americans. Senator Bernie Sanders has proposed to forgive all of the $ 1.6 trillion in student loan debt, including federal and private student loans. Biden has a $ 750 billion student loan plan that focuses on paying income. New York Governor Andrew Cuomo temporarily suspended the collection of student loans and also suspended mortgage payments for those experiencing financial difficulties.

While President Trump called for an end to the public service loan forgiveness program in his annual budget, he proposed a simplified income-based payment plan, canceling student loans.

An income-based payment plan will lower my interest rate: This is false. Paying income reduces the monthly payment, but does not reduce the interest rate. Although your monthly payment may go down, you could have more money because your interest is piling up while you have a lower monthly payment. After 20-25 years of age, you can receive federal student loan forgiveness. Unlike refinancing student loans, however, you will not have a lower interest rate to pay off student loans faster.

If coronavirus has directly affected your wallet, you're probably wondering how to pay off student loans and save money. This is what you need to know and what to do about it.

So you owe student loans, and the covid-19 pandemic is still raging. The financial impact is felt everywhere, and you are not alone. How do you manage the big changes in your life, and how do you pay off student loans? This is what you should do.

Don't Panic

It sounds like obvious advice, but when it comes to money, you have to panic. You must understand all of the options available to make the best decision for your specific financial situation. Remember that your financial situation is unique, so that we will find the best option for you. Although Democratic Senates have proposed to cancel payments for student loans, in most cases, payments are required. The good thing is that public leaders have taken proactive steps to help ease the financial burden caused by the coronavirus outbreak. For example, New York Governor Andrew Cuomo temporarily suspended the collection of student loans. President Donald Trump has announced that he is renouncing federal interest on student loans, and details of his student loan plan should be available soon.

Sign Up for an Income Repayment Plan

For federal student loans, consider an income-based payment plan, such as IBR, PAYE, or REPAYE. Payment is based on discretionary income, family size, and other factors and is generally less than the standard payment plan. After a certain period, for example, 20 or 25 years, federal student loans (and not private student loans) can be canceled. Therefore, the advantage is that it is possible to reduce the monthly payment of the federal student loan and receive the forgiveness of the federal loan. The downside is that you owe an income tax on the loan forgiveness you receive.

Request Cancellation of the Public Service Loan

Although Trump called for an end to the utility loan forgiveness program in the annual budget and supports replacing it with a simplified income-based payment plan, the program is still active. The Public Service Loan Forgiveness is the main federal government program that will cancel all federal student loans. All conditions must be met, including, but not limited to, 120 monthly payments while working full time for a qualified public servant or a non-profit employer. This is different from Senator Bernie Sanders' plan to forgive all of the $ 1.6 trillion in student loan debt, including federal and private loans. You can start by filling out an employer certification form with the United States Department of Education. 

Refinancing Student Loans

Refinancing student loans is one the most effective way to reduce the interest rate and the monthly loan payment. Student loan refinancing in charges have fallen significantly: when you refinance student loans, combine private student loans, federal student loans, or both into a new student loan with a lower interest rate. This lower interest rate means that you can save each month considerably on student loans. This means more money in your pocket.

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