May 2020
College & Tax Planning

Student loans can be a burden, and the current Covid-19 pandemic is not making it any easier. With unemployment at record highs, Americans are struggling to pay for necessities, let alone worry about student debt. One of the features of the CARES Act or the Coronavirus Aid, Relief, and Economic Security Act, which was passed by Congress and has supplied $2 trillion of relief. Part of the CARES Act includes automatic suspension of principal and interest payments on federally held student loans through Sept. 30, 2020. 

Of course, there is the fine print. Student loans come in all different shapes and sizes. How do you know for sure that you qualify for this type of relief? What about private loans? Most federal student loan borrowers don't have to do anything to qualify for CARES Act relief. 

But how do you know if you qualify? 

You need to confirm that you have federally held federal loans. Federal loans that don't qualify for CARES Act relief are under the Federal Family Education Loan Program. Even though those loans are a part of a federal program, some of them are held by commercial banks, not the federal government. Those include PLUS loans and Stafford loans. Perkins loans held by an institution or school are also not eligible. 

What if I have private loans that don't qualify for CARES Act relief? 

Private loans, unfortunately, have no sort of blanket guidance other than to call your loan holder if you're financially struggling and see what they're offering. 

Many private lenders are offering some automatic relief, while others are offering their typical option of forbearance, which allows borrowers to postpone payments, but interest usually continues to accrue. That means forbearance can end up costing a borrower more in the long run. One option to consider instead of forbearance is an income-driven repayment plan. That will help lower your monthly payment. 

The best-case scenario is that you can continue making payments, those payments will be counted toward the principal of your loan, reducing your overall interest payments and ultimately paying down the loan faster. If you have questions about your current financial situation, please do not hesitate to give us a call! inancial plan, please don’t hesitate to reach out!  

If you have questions, please contact us.

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