Financial Help, Questions and Answers During the Coronavirus Pandemic

What’s happening with federal student loans

If you have a federal student loan, you should automatically receive some relief without lifting a finger: Borrowers will be placed in so-called administrative forbearance, which allows you to temporarily stop making payments from March 13 until Sept. 30.

No interest will accrue during the administrative forbearance period. (Usually interest continues to pile up when borrowers pause their payments because of a hardship.)

Borrowers who want to continue making loan payments can do so — and you may end up paying the balance down faster if the full amount of your payment can be applied to your loan’s principal.

The Education Department says loan payments that are skipped under the administrative forbearance will still count toward loan forgiveness for borrowers in income-driven repayment and public service loan forgiveness programs, as long as other usual requirements are fulfilled. Your loan servicer will have more details.

But keep in mind that this relief applies only to federal student loans owned by the Education Department, such as direct loans (including those in default). Loans issued through state agencies and others, including big private lenders like Sallie Mae, are not covered. Other loans not covered include the majority of Federal Family Education Loans, which are mostly held by commercial lenders, and school-held Perkins loans.

Some private lenders are offering relief programs. Sallie Mae said it was offering suspension of payment for up to three months, with no damage to a borrower’s credit. Another, Navient, made an identical offer for “qualified” borrowers; a spokesman said you just need to contact the company and explain how your financial situation had changed. A third big private lender, Wells Fargo, says it will offer help, but a spokesman said the bank would not commit to a set number of months or any other specifics.

If you have more questions, check out the Education Department’s QA here. It addresses what to do if you have auto-debit payments (they’re suspended during this period), are trying to rehabilitate a defaulted loan, and more.

Article source: https://www.nytimes.com/article/coronavirus-money-unemployment.html