Senators Elizabeth Warren, Bernie Sanders and several other Democratic senators are requesting student loan relief for the millions of borrowers who do not qualify for the automatic payment pause.
Thanks to the CARES Act, federal student loan borrowers are able to stop making payments on qualifying student loans without any interest accruing through September 30, 2020. This is automatic, though, borrowers can still continue to make payments if they wish.
While this news came as a relief to many dealing with student loan debt, there are millions of borrowers who do not qualify for this relief. Private student loans do not qualify for a payment pause although some private lenders are offering options to those impacting by COVID-19.
Dozens of senators wrote letters to private student loan lenders, such as Sallie Mae, asking them to let borrowers temporarily pause student loan payments without financial penalties. Senators are requesting that interest not accrue or capitalize during this time.
In addition to the interest-free payment pause, the senators are also asking that private lenders discharge as many student loans as they can for borrowers who have filed bankruptcy or will unlikely be able to pay their debts due to financial distress.
Senators are also asking lenders to establish more affordable repayment plans for borrowers as well.
The effort for student loan relief comes as no surprise for Senator Warren and Senator Sanders as both have called for widespread student loan forgiveness during their campaigns.
The Center for American Progress (CAP) issued a report on April 2, 2020 that urges Congress to extend the 6-month payment pause and interest waiver to include all borrowers of Federal Perkins Loans and Federal Family Education Loan Program loans (FFELP), as well as the other student loan relief options (paused payments count toward loan forgiveness, ceasing collection activity).
New York Governor Andrew Cuomo just announced today, April 8, 2020, that the state has reached an agreement with private lenders to provide student loan relief to approximately 300,000 New York borrowers who were left out of the CARES Act. This includes a 90-day payment pause, waived late fees and no negative reporting to credit reporting agencies. Borrowers must contact their loan servicer to obtain this relief.
How to Manage Student Loan Debt during Coronavirus
There are options for dealing with student loans in times on unemployment, for federal loans and for many private lenders. If you don’t qualify for a payment pause, call your lender and see what options are available.
If you have high-interest private student loans, you might want to consider refinancing student loans. This could mean a lower interest rate, which could save you money on your loan. Some lenders, such as Earnest, allow you to customize your payment to work with your budget. Going on a longer payment term may mean lower monthly payments, but you’ll pay more in the long-run. Consider the pros and cons of refinancing and if it’s right for you.
Keep in mind that refinancing federal student loans means a loss in federal benefits, including the temporary interest-free payment pause from coronavirus. You’ll also lose the ability to enroll in a payment plan based on your income, potential to have loans forgiven, and generous options to pause payments during times of unemployment or economic hardship.
If you decide that student loan refinancing is a good option for you and your loans, Credible is a great tool for comparing multiple lenders at once.
If your income hasn’t, and likely won’t, be impacted by COVID-19, you could consider still making payments towards your federal student loans. If you have a solid emergency fund and no other high-interest debt, your payment will be going completely towards the principal balance, making more of an impact.
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