In response to the spread of the coronavirus and its impact on the U.S. economy, the federal government has taken steps to help Americans get through the next few months on lower income.
If you have federal student loans, you don’t have to make any payments until September 30, 2020. The Coronavirus Assistance and Economic Security Act (CARES), approved the placement of all eligible federal student loans for administrative forbearance. Lenders have automatically entered qualifying loans and all automatic payments should have ceased. Plus, if you’re already behind on your student loan payments, lenders can’t call or send letters to collect the debt until September 30.
Perkins loans, federal family education loans, and private loans are not eligible for this forbearance.
If borrowers have private student loans, there are several ways to reduce their student loan debt faster.
1. Refinance student loans
At the end of March, the Federal Reserve lower interest rates to zero percent to help encourage consumer spending as the coronavirus spreads. Therefore, you may be eligible for refinancing your federal student loans. If you have a loan that is not covered by the CARES Act, refinancing your loan could reduce your expenses immediately.
Don’t forget to visit Credible to research the rates of different private student loan companies to make sure you save as much money as possible.
However, there is a caveat. Borrowers whose loans are covered by the CARES Act can wait before considering refinancing. It’s hard to beat a monthly payment of $ 0 at a zero percent interest rate.
2. Keep paying anyway
You don’t have to keep making monthly student loan payments lender, but that doesn’t mean you shouldn’t. The current interest rate on all federal student loans is 0%. If you continue to make your monthly payments, your entire payment will go directly to reducing the principal balance.
If you want to continue making payments, you can make the payments on your lender’s website or call to ask them to reinstate your automatic payment agreement.
For example, if your monthly payment is $ 300 per month and you continue to make the same payment at zero percent interest rate, you could significantly reduce your total loan balance by the end of September, without spending extra money.
Remember that if your situation changes, you can stop making monthly payments and re-apply for abstention before the September deadline.
If you have a little extra cash, it might be a good time to make some extra payments. The extra money you spend to pay off your student loan will have a much bigger impact with a zero percent interest rate.
3. Save it in an account that can earn interest to make a larger payment.
If you want to give your money even more power, consider depositing your monthly payment in a interest-bearing savings account. Even if you aren’t likely to make a lot of extra cash, every little bit helps. You’ll want to shop around for the accounts that offer the highest returns with little to no fees to maximize your savings.
Once your monthly payment is due again, you can make a large lump sum payment on your student loan bill.
4. Get (part of) your money back
Under the CARES Act, federal student loan lenders were supposed to stop making automatic withdrawals from your bank account. If your lender took a bit of a delay in setting this up, you might see any payments you made after March 13 returned to your bank account. You will need to call your lender directly to request the return of payment. Again, this is for borrowers with federal student loans outstanding – not private loans.
Student loan borrowers have great flexibility in how they handle their payments until at least September 30. Whether you want to continue making monthly payments, pay extra, or make a partial payment, you can do so without late fees or penalties. . Take the time to consider all of your options, especially if the administrative forbearance program does not cover your loan. And remember, if you are considering refinancing your student loans, do your research. Use a tool like Credible to make sure you save as much money as possible.