The coronavirus pandemic continues to shake up our daily lives and finances. But the emergency has also caused several financial aid programs to be swiftly rolled out by the federal government.
One such initiative to help federal student loan borrowers was recently announced by President Trump, providing the opportunity to pause all federal loan payments for at least 60 days. And while these payments are suspended, federal student loan lenders will also drop interest rates to 0% for all outstanding bills.
Here’s everything you need to know about this federal student loan relief program and how to take advantage of it.
What does it mean to postpone federal student loan payments?
Under this new initiative, federal student loan borrowers have the option to stop making payments for up to 60 days with no interest or penalty.
Essentially, it works the same as a standard student loan deferment or forbearance program. With a typical deferment or forbearance, you would need to prove financial hardship or a unique need to your lender in order to be approved. And under normal circumstances, many types of loans would still accrue interest while payments are postponed.
An added benefit is that federal lenders have been mandated to waive interest charges during this timeframe — meaning no interest charges will be applied to your loan total during the 60-day postponement window.
How does this federal student loan relief program work?
This postponement period for federal student loans will be effective for at least 60 days, and once enrolled, will retroactively start from March 13, 2020.
Additionally, anyone who already had an overdue student loan bill of more than 31 days (as of March 13) will get an automatic suspension of payments.
If a borrower enters delinquency during this government-issued forbearance window, their payments will be automatically paused as well.
For borrowers who are still comfortable making their monthly payments, their full payment will be applied directly to the loan principal — with no interest deducted.
How do I pause my federal student loan payments?
This 60-day forbearance is optional — federal student loan borrowers are not automatically enrolled in this program.
In order to pause your payments for 60 days, you must contact your federal student loan servicer directly — either through your customer portal on their website, or by phone, email, or online chat. Your servicer is the company through which you make your monthly payments.
Many servicers currently have coronavirus information and updates easily visible on their websites, making it simple to apply for and take advantage of this initiative.
What if I have private student loans?
In an effort to support millions of student loan borrowers during the coronavirus emergency, the federal government has alloa temporary suspension of federal student loan payments.
However, this offer does not include private student loans.
In the current environment, private lenders are being flexible with borrowers facing a sudden loss of income. However, you’ll still accumulate unpaid interest during any forbearance period.
If you have private student loans and are looking for ways to cut costs, a smart solution could be refinancing.
For those who qualify, student loan refinancing allows you to get a new repayment term and better interest rate.
If you’re currently struggling to afford your student loan bill, you can extend your repayment term (sometimes up to 20 years) to dramatically lower you monthly payment. Plus, by getting a lower interest rate, you’ll pay much less month-to-month on interest charges and ultimately save significantly over the life of your refinanced loan.
You generally need to have steady income to qualify, so borrowers who have been permanently laid off (rather than furloughed) may have a hard time getting approved. That said, if your income has taken a hit, you may be able to qualify with a cosigner.
The essential first step to refinancing is to compare rates and terms from lenders who you qualify for. Purefy’s Compare Rates tool makes it fast and easy to check your best refinancing offers from multiple well-known lenders — all with one simple form and no impact to your credit score.