Because of the economic recession and widespread dismissal by the COVID-19 pandemic, students and their parents might be struggling to pay the student loans right now. The Government and private lenders offer some relief options.
Federal student loan relief
The Government has suggested some relief programs such as automatic forbearance, terminating of all types of collection activities of federal student debts and waiving interest of student loans, which were held federally. These relief options that will last through September 30, 2021 may help borrowers to handle student loan problems.
Federal Student Loans, which are eligible for relief:
Federal Family Education Loan Program (FFELP)
Federal Direct Loans
Federal Perkins loans
Defaulted Health Education Assistance Loan (HEAL)
Federal student loan borrowers automatically will accept a forbearance till the end of September 30, 2021. There will be no payments during this period. Moreover, no interest will accrue.
This federal student loan forbearance will be automatic, but if you want to decrease your overall balance, you can make installments of the amount for the next 6 months. Keep in mind that your overall student loan balance will not rise during the COVID-19 pandemic. Therefore you can make other money transfers. In addition, the repayment term might be extended, which means that your last installment day will be 18 months later than you initially thought. Please use the online paystub generator if you need to produce payslips for your employees.
Let’s say that you have federal student debts and refuse to attend a school for some reason. In that case, you have 6 months to repay the loan. For instance, if you attended school for the last time in the fall and thought to take the spring semester off. Your installment would typically come due in the spring. The extended forbearance postpones your first installment till September.
When you go back to school again (at least half-time participating), you can delay payments till you graduate from school or leave again. But since you already used up your grace period, your loans would be due right away when you finish school or leave once more. But since you previously spent grace period, your loans would be expected immediately when you finish school or leave once more.
Federal student loan borrowers can select several various repayment options. If you cannot afford your student loan payments in the long term, you can enroll for an income-driven repayment plan.
An income-driven repayment plan lets you choose the best plan for you based on your family size and current income.
The Department of Education announced relief for borrowers who have received student loan forgiveness due to their disability. During the coronavirus pandemic, no borrowers are at risk of having their loans reinstated. Borrowers who have accepted loan forgiveness by Total and Permanent Disability Discharge must submit yearly income documentation for the next three years. But in some cases, debts can be reinstated. For example, if their income surpasses state destitution guidelines or if borrowers fail to give earnings documentation by any means.
Student Loan Forgiveness
Public Service Loan Forgiveness, the existing student loan forgiveness program, is still in effect.
If you are a nonprofit or government employee pursuing Public Service Loan Forgiveness (PSLF), you are not obliged to make payments within the automatic forbearance period.
Until September 30th, 2021, all collection activities on federal student loans have been stopped by the federal government. Wage and Social Security garnishment, Tax refund seizure, collection calls, and letters are included in these collection activities.
Private Student Loan Relief Option
Some opportunities offered by student loan debt forgiveness can help you delay your installment for up to 12 months or even longer with postponement policies or forbearance . These deferment plans differ from lender to lender. As I mentioned before, in federal loan forbearance, you do not accrue for any interest, but in this case, interest will continue to accrue.
Some lenders suggest extra relief options, including postponement or short-period emergency forbearance. The others are repaying or waiving fees for late installments.
Many of the lenders are proceeding their relief plans in 2021.
If you are in doubt, you can keep in touch with your lender to find out what new options are available now. If you confront financial problems, you can write a letter to your lender or servicer, mention your issues there, and ask for an alternative repayment plan. It would be better if you make clear to them that you will be at risk of going into default if they are not willing to decrease your monthly payment.
Student loan refinancing
Due to the current economic climate, student loan refinancing is low. It is not a good idea to refinance your student loans, while you have federal student debts. If you refinance, you will not only lose actual federal loan advantages, such as income-driven plans and forbearance, but also you may lose the benefits of new relief options that the federal government suggests due to the COVID-19 pandemic.
There are some relief options available in 2021, conducted by the Federal Government and private lenders. By analyzing the eligibility requirements, you can choose the most appropriate one for yourself and obtain the benefits of it. Additionally there are many colleges and universities like ITT Tech that were sued for bad practices. Check to see if your University or college is abiding by all the necessary rules and regulations.