If you’re like many Americans, student loan payments may account for a large chunk of your monthly budget. And, during the current economic downturn due to COVID-19, you may be feeling stressed about continuing to make these payments and wondering if there’s any help available.
We’ve compiled information below about student loan deferment in general and the specific resources that may be available to assist you during the COVID-19 crisis.
What is Student Loan Deferment?
Generally speaking, a deferment on any loan is an arrangement with your lender that allows you to temporarily stop making payments on the loan. Many student loans offer options to defer payments in times of financial hardship. This hardship may be due to lack of work while your education is continuing, unemployment, illness, military service, or another life- or income-altering event.
How student loan deferment impacts interest (i.e. whether it continues to accrue during the time of deferments), the total amount you’ll owe, and any loan forgiveness programs you’re hoping to qualify for may vary based on the loan servicer and the terms of your loan.
Additionally, not everyone or every circumstance qualifies for student loan deferment. You can learn more about federal student loan deferment options here. For private student loans, start by contacting your loan servicer directly.
How Can I Get Help With My Student Loans During COVID-19?
If you’re having trouble paying any bills during the COVID-19 crisis, you’ll want to reach out to the company or lender right away to see what assistance may be available to you during this time. They may be offering special assistance during this time or have other repayment options that can help you now, after the COVID-19 crisis has passed, and in the future as the economy recovers.
Help for Federal Student Loan Borrowers
For federal student loans, specifically, the Coronavirus Aid, Relief, and Economic Security (CARES) Act has components that provide temporary payment relief to borrowers with qualifying federal student loans.
Since not all federal student loans qualify, the Federal Trade Commission suggests first contacting your federal student loan servicer to determine if your loans qualify.
If your loans qualify, there are some important things to know about the relief, including:
- You can stop making payments on qualifying federal student loans. Payments are currently expected to be deferred through September 30, 2020.
- If you’ve made any payments since March 13, 2020, you may be able to get a refund, allowing you to apply those funds to other expenses you’re working to manage during this time.
- You can continue making payments if you’d like and are able. It’s important to note that the interest rate on qualifying federal student loans is now 0% through September 30, 2020, so you can put more toward principal, though this depends on past interest being paid off, which in some circumstances is unlikely.
- If your qualifying federal student loans are in default (meaning you’ve missed multiple payments without having entered into an agreement to not make payments), you won’t get collection calls or bills from the Department of Education until September 30, 2020.
Before determining how to proceed with your federal student loans, be sure to review these answers to common borrower questions from the office of Federal Student Aid and contact your loan servicer directly to ensure you’re making an informed decision that’s best for you and your individual circumstance.
Help for Private Student Loan Borrowers
If you have a private student loan, the above information will not apply, as the CARES Act only provides this relief to qualifying federal student loans.
To get assistance with any private student loans, reach out to your loan servicer as soon as you anticipate that you’ll be unable to make your loan payments. Asking for help before missing a payment can help protect your credit if you’re able to enter into a new agreement without missing any payments.
Money Management During COVID-19
Maybe you’re having difficulty making student loan payments. Or maybe you’re facing general money management challenges. Whatever the cause, you’re not alone if you’re struggling with the financial impacts of COVID-19. We’ve compiled information on important topics such as economic impact payments, managing your emergency fund, and preparing to be laid off to help you during this time. Visit our blog and click on the Navigating COVID-19 tab to access these resources and more.