On March 27th, 2020 a $2 trillion dollar stimulus plan passed the House and was signed into law. This stimulus plan included federal student loan relief. Below are the essential facts you need to know if you have federal student loans.
What you need to know about the stimulus plan student loan relief
- Payments will be suspended until September 30th, 2020.
- The suspension of payments will still count towards forgiveness programs including Public Service Loan Forgiveness. This means even though you won’t be required to make payments, you will still have one ‘payment’ each month count towards PSLF (but you will need to maintain your job for eligibility).
- Student loan interest was frozen on March 13th. This is still in effect and no interest will accrue until September 30th, 2020.
- This is ONLY for federal student loans owned by the U.S. Department of Education and does not apply to private student loans, school held Perkins loans or FFEL loans held with private institutions.
- If you are in default, these 6 months of suspended payments will still count towards loan rehabilitation.
- No wage garnishment or collection will occur backdated to March 13th.
These changes should happen automatically. Do not stop making payments until you see these changes.
Updated March 29th 2020
Not sure where to find your student loan information?
If you need to find your student loan servicer, log into the National Student Loan Data System. All your federal student loan data is housed here. To log in, you will use your FSA ID (the same login for you created for your FAFSA and Federal Student Aid’s online systems).
What the stimulus plan student loan relief means for you
If you have federal student loans this is good news. Your next steps depend on your current financial situation.
Do you have an emergency fund that covers 2 -3 months’ worth of expenses?
If you don’t have a robust emergency fund yet, this should be a priority. Put the money you would otherwise pay towards student loans into a savings account and do not touch it until you need it.
Are you paying off your student loans or on a forgiveness plan?
If you’re enrolled in a forgiveness program like PSLF or IDR, you do not need to make extra payments at all. This money will be forgiven in the future and you should stick with that plan if you have already committed.
If you’re like me and aggressively paying off student loans, this could be a great opportunity to hit your principal hard. With 0% interest, more of your normal payment can go towards the principal and not just interest.
Remember, you should only attack your student loan debt right now if you can afford it. This means your bills are paid, you have an emergency fund and you do not have any consumer debt like a credit card.
If you anticipate hardship beyond September 30th
If you have lost your job and anticipate you won’t be able to make payments after September 30th, then you should contact your student loan servicer. You can opt for an Income-Driven Repayment plan or apply for forbearance or deferment.
Do you have private student loans?
If you have private student loans, you’re left out of the stimulus student loan relief. However, you still have options.
You can always call your loan servicer and negotiate your interest rate. If you’re having a hard time making payments you should discuss financial hardship policies.
You can also consider refinancing your private student loans for a lower interest rate and lower monthly payment. A reminder that a lower monthly payment often correlates to a longer loan term. Meaning you could pay more in interest compared to a shorter loan term and higher monthly payment. If you’re looking to refinance I recommend you check out Credible to compare multiple lenders in one place.
Note: I am not a licensed financial advisor. I am sharing what I know and strive for integrity in this.