Student Loans and COVID-19
The widespread economic halt arising from the Coronavirus pandemic has had strenuous implications on citizens across the world. There’s no telling how long the virus will last and its resultant effect on Americans. Offsetting student loans has always been a pressing task for most citizens and with the coronavirus eliminating/reducing income, the struggle has increased. The unexpected pandemic has made it even more difficult for the average American to offset their debts – student debts being among the most troublesome. Reports show that, as of March 2019, American’s outstanding student loan debt topped $1.5 trillion. Most people are beginning to wonder how to deal with their mounting debt during this economic crisis.
The CARES Act and federal student loans
Because of the recent financial difficulties, the U.S Government deemed it necessary to implement a relief Act known as The CARES Act (Coronavirus Aid, Relief, and Economic Security Act). The CARES Act was implemented, in part, to help with student loans. The Act provides for a loan debt forgiveness that spans through to the 30th of September, 2020. Further, the Act provides that 0% interest will accrue on student loans for this period including zero late assessment fees. But then the fact that student loan debts aren’t due does not mean you shouldn’t continue paying them off if you have the means.
Private student loans
The downside of the CARES Act is that it applies to only Federal Loans and doesn’t benefit private student loans. The implication of this is that interest still accrues, and payments are expected to be made when due. That being said, certain lenders in some states in the US have taken a cue from The CARES Act to provide payment forbearances for those struggling to offset their student loans. A few of those private student loan providers include Navient, CommonBond, and Sallie Mae.
The CARES Act also provides for payment in the form of a Stimulus Check to those who have their tax filings in order. Although it must be tempting to want to use this bonus income to offset debt, you should however understand that the stimulus check is shielded from treasury offsets and interceptions and it is also not regarded as taxable income. This means that it would be futile to attempt to use your stimulus package to offset student loan debt. There are other advisable payment plans such as a Pay as you Earn or the Income-Based Repayment plan.
It is important to understand the implications of a differed or paused payment especially for private student loans. If you’re having trouble deciding on the best course of action to take during this period, it is best to contact your loan providers on the options available and remember that it’s always smarter to pay off your student loans if you have the means to than wait it out.
If you are trapped in an unmanageable student loan debt situation, you have options. The attorneys at Dsouza and Strachan Law Group have the knowledge and experience to get you out of the grip of long-term debt. Contact Dsouza and Strachan today for a free consultation