Update: Payments are now suspended through September 30, 2020. Interest rates will also be 0% through September 30, 2020. Remember, this only applies to federal student loans, not private or FFEL Loans.
The economic slowdown caused by the Coronavirus has caused many Americans to wonder if their paychecks with continue and, if they do, will it be enough to cover everyday expenses. Americans owe over $1.64 trillion in student loan debt, spread out among approximately 45 million borrowers. In 2019, 69% of graduating seniors had student loan debt. With paychecks diminishing or stopping completely as the Coronavirus wreaks havoc across the globe, is there any relief coming for those who owe student loans? The good news is that, yes, federal student loan payments can be paused for 60 days. Interest will also be waived for 60 days.
If you want to suspend your student loan payments for 60 days, you have to get an administrative forbearance.
A forbearance is a temporary modification of the monthly payment obligation on an education loan. Both federal student loans and private student loans offer forbearances, but with different criteria and terms.
To do this, you must contact your federal student loan servicer. Unlike the interest payment waiver, this does not happen automatically. This only applies to federal student loans help by a federal government agency. Contact your student loan servicer if you are unsure whether your loan qualifies or not. Typically, qualifying for forbearance requires extensive documentation, but due to the current situation, the Department of Education has directed federal loan servicers to grant all forbearance requests.
There are three main types of forbearances: temporary cessation of monthly payments, temporary reduction in the monthly payment amount (i.e. interest-only payments), or an extension of the repayment time frame. A forbearance is not a permanent modification. While the Department of Education has said that this will be active for 60 days, President Trump has insinuated that, should the crisis continue, an extension on this policy is a possibility.
The Department of Education has also announced that any borrowers who are more than 31 days delinquent as of March 13, 2020 will automatically have their payments suspended. For those who choose to continue paying their loans, their payments will go towards the principal.
Should I pause my student loan payments?
There are some things to consider when deciding whether or not to pause your loan payments. In normal circumstances, interest would still accrue, even if your request for a forbearance was granted. Because student loan interest rates are 0% right now, this is not a factor. People should also consider that requesting a forbearance will extend your repayment period. Even if you desperately need short-term relief, always consider the long-term impacts of stretching your student loan payments further into your higher-earning years. However, requesting a forbearance is always better than simply not paying your loans.
If you have federal student loan debt that you cannot afford to cover right now, think about whether a forbearance is right for you. If you are unsure, talk to a professional. If you have any questions specific to your loan, call your loan servicer. You can visit the Federal Student Aid website at https://studentaid.gov/announcements-events/coronavirus for the most up-to-date information on student loan payments.
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