News Alert: Student Loan Payments Suspended Through 2020
The 411 on your student loans
Over this past weekend, the Federal Student Aid (FSA) implemented President Trump’s executive order to extend the student loan relief program through the end of the year. This program was originally implemented back in March as a relief to the economic hardship caused by COVID-19. While this first deferment was set to expire in September, this extension will now defer student loan payments and interest through the end of 2020.
Key points to know:
- This deferment is for FEDERAL student loans only. This means that if you originally took out private loans or refinanced your federal loans into private loans this will not apply. However, if you have private loans and need assistance I still suggest you call your lender and see what options they are providing during this time.
- Student loan payments are suspended through December 2020. Yup you heard that right. No payments are due through the rest of 2020. Yes this also means no penalties for non-payment.
- Interest rate will be held at 0% through December 2020. Regardless of your interest rate, it is now set to 0% for the rest of 2020. This means that you will not be accruing interest on your student loans through the rest of the year. Meaning if you stop making payments today, then on January 1, 2021 you will owe exactly the same amount as you owe today. No penalties or interest for the rest of the year.
- Deferment is automatic. While loan servicers will take a few weeks to implement this, your student loan payments will be automatically suspended until 2021 without penalty. You should see your account reflect this new date over the next 2-4 weeks.
- You can still make payments. During this time you can continue to make any amount of payment without penalty. A big positive about this is that 100% of your payments for the rest of the year will go to your principal balance. However, since your account will automatically be in deferment, you will need to directly make the payments for the rest of the year.
- Collections on defaulted loans are halted. For the rest of the year, garnishment of wages to collect on defaulted loans will also be suspended. If you’re in this camp, this is the time to call your student loan servicer and come up with a new payment plan. This is a much better and cheaper option to wage garnishment.
- Non-payment WILL count towards PSLF. Even though you may not be making payments, these “non-payment” months will still count towards your 120 payments required by the Public Service Loan Forgiveness (PSLF) program. They will also count as payments required to receive loan forgiveness under the income-driven repayment plan.
If you have other questions or need more specific help you can always book a FREE 30 minute consultation.
Stay safe and kind to each other
~ Tiffany Groode, Financial Coach
@groodewithmoney II firstname.lastname@example.org