Posted on Apr 01, 2020

On March 27, 2020, a stimulus bill was signed into law that helps people deal with the devastating economic effects of the coronavirus. Many of the provisions help student loan borrowers, and while they provide some welcome relief, the new law does not address all of the problems that student loan borrowers face. So what you do next about your loans can make a big difference!

How the Stimulus Bill Helps

There are certainly some good and helpful provisions in the new law. For example:

  • Payments and interest on all federal loans held by the U.S. Department of Education will be suspended for six months, to September 30, 2020. You don't even have to do anything; this will happen automatically.
  • Even though payments will be suspended, those six months will still count as qualifying “payments” for relevant student loan forgiveness programs, including Public Service Loan Forgiveness.
  • The Department of Education will also suspend collections efforts on defaulted federal student loans, and will cease wage garnishments, Social Security offsets, and tax refund seizures.
  • Many Americans will receive direct payments from the government of up to $1,200 which should be shielded from Treasury Offset, a program used to seize federal income streams to satisfy defaulted federal student loans.

Sounds good, right? The next 6 months will be easier! Not necessarily!

How the Stimulus Bill Doesn't Help

The bill was carefully worded, and skirts around a lot of issues that student loan borrowers have, and will still have during those six months. Just to name a few:

  • The law is specific in what it covers when it comes to federal loans: Direct Loans held by the U.S. Department of Education. This means that if you have an older FFEL loan, originated and still held by a private bank, you're out of luck. The same is true for Perkins loans, which are held and administered by the school.
  • Even though they will not actively garnish your wages on a defaulted loan during this period, if the wage order was issued it will still be in place and can prevent you from getting out of default through a loan consolidation.
  • It doesn't help you with your New Jersey CLASS loan through HESAA or with any private loans.
  • It doesn't forgive the loans, so you will still be facing problems once the music starts again on October 1, 2020.

So as you can see, Congress' Stimulus Bill does patch some cracks in the dam, but a lot of water is still leaking through and can drown you eventually.

What You Should Do Before October 1

But that doesn't mean that Congress hasn't given you a great opportunity to take action and get things back on track! You can use this time to make your whole situation better. You can:

  • Get out of default on all of your federal loans (not just the direct ones), and into an affordable, income driven repayment plan. Don't have a job? The negotiated payment could be as low as $0.00!
  • If your federal loans are delinquent, then get into an affordable repayment plan now, so that you will be in the right place on October 1
  • Reach out to HESAA on any CLASS loans you may have that are not yet in default. There may be some relief there as well.
  • If your CLASS loans are in default, then negotiate an affordable payment plan with their attorney

You need to cover all of the bases to resolve all of your student loan problems, so don't wait! Now's the time to act!

Need Help with That?

Navigating all of these waters can be tricky and not for the faint of heart. If you have tried it yourself and failed, or if you just want someone else to deal with it, then I can help! Just call my office at 856-432-4113 to schedule a virtual appointment, so I can analyze your situation.

If you would like more information about student loans, you can download my free books, I Graduated; Now What? A Guide to Dealing with Your Student Loans, and Paying for Your Classes with a CLASS Loan: A Survival Guide to HESAA.

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Steven J. Richardson
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Bankruptcy, Collections, Student Loan, DUI and Traffic Court attorney in Woodbury, NJ.