Posted on Feb 22, 2019

People are under enough stress with what is going on these days with the Corona Virus, especially if they have been laid off because of it. On top of that, if they have student loan payments to make, along with the rent/mortgage, food, car payment, etc., it just makes matters worse!

But if you have federal loans, there is some good news. On March 13, 2020, the President announced that interest would be waived on all federally held student loans.

Are Your Loans Eligible?

The key words here are "federally held student loans," so not all of your loans may be eligible. The waiver includes Direct Loans, as well as Federal Perkins Loans and Federal Family Education Loan (FFEL) Program loans held by ED.

One tip is that if you took out a Stafford Loan after July 1, 2010, it is a Direct Loan. If it was prior to that, and the loan is owned by a private lender, then it is not eligible for the waiver at this time. Also, some Perkins Loans are held by the institution you attended, and are not eligible either. If you want to be sure, contact your servicer or access the Department of Education's Online Database.

If your loans are not eligible, you might be able to address this through a consolidation to a Direct loan. I can help you with this!

How Do You Get the Waiver?

The great thing is, you don't have to do anything! It will be done automatically for you! No, ED will automatically adjust your account so that interest doesn’t accrue. In fact, it has already happened. Interest will not accrue for at least 60 days, beginning on March 13, 2020. This period may be extended, depending on the status of the COVID-19 national emergency.

So How Does It Work?

How it works, and how it helps you, depends on your situation. If you are making payments, the full amount will be applied to principal. However, if your loan had already accrued interest prior to March 13, your payments will first be used to pay off that outstanding interest.

Your monthly payment will not go down, but the full amount of the payment will be applied to principal once all the interest that accrued prior to March 13 is paid. This means that you are likely to pay your balance down more quickly during this zero-interest period.

What If You Can't Make the Payment?

If you can't make the payment due to job loss or reduction in hours, you can apply for an administrative forbearance to give you a breather. During this time you don't have to make payments, but interest accrued during that time will be waived and not rolled into your loan balance when you come out of the forbearance. You have to request the forbearance; it is not done automatically. To do so, contact your loan servicer.

If you’re at least 31 days behind on your payments as of March 13, or become more than 31 days delinquent after that date, you’ll automatically be placed in an administrative forbearance to give you a safety net during the COVID-19 national emergency. If you are already in default, I suspect you will have to get out first. Call my office to discuss it further.

When You Shouldn't Suspend Payments

If you are in an Income Driven Plan (IDR) already, especially if you are working towards Public Service Loan Forgiveness (PSLF), you may not want to do this. You may want to apply for a lower IDR payment to match your drop in income, and that payment could be as low as $0! That would still count towards the 120 payments under PSLF (assuming other employment requirements are being met)

Also, if you can afford the monthly payment, you should do so, as the money will all go towards principal while interest is waived. This will move you that much closer to paying it off!

The situation is always changing, as you can see from what you read in the newspapers. I would therefore recommend that you check back on the Department of Education's site for any updates.

Need Any Help?

Federal student loans can be complicated, and if you are struggling to make the payments, or can't make them at all, you may need some help. If you should need help with your student loans, whether it be negotiating a lower income driven payment or consolidating your FFEL loans so that they qualify for the waiver, just call me at 856-432-4113. During the "social distancing" of this crisis, I can schedule a virtual consultation for you. Check here for details.

If you would like more information about student loans, you can download my free book, I Graduated; Now What? A Guide to Dealing with Your Student Loans.

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