Student loan cancellation during coronavirus: everything you need to know


The CARES Act can affect the way you approach federal student loan repayment. (iStock)

Federal Coronavirus Aid, Relief and Economic Security Act (CARES) brought much needed financial relief to Americans, including specific provisions for people receiving federal student loans. Eligible federal student loan borrowers have been granted temporary student loan forbearance and a 0% rate, both due to expire in late September, unless President Trump’s executive order to extend it until the end of the year is not maintained.

It should be noted that student loan cancellation is an option for Federal Student Loans – but it is more difficult to obtain for private student loans. For example, you can get student loan repayment benefits or a repayment through your employer, but not all companies offer this.

One thing you can do is determine if refinancing a student loan makes sense. Refinancing could help lower your interest rate, which can also lower your monthly payments, making private student loans more affordable.

To easily compare student loan refinance rates online, check out Credible. You can get refinancing quotes from several lenders without negatively affecting your credit score. This can make it easier to find the best student loan refinance option for your needs and budget.

It may be helpful to run the refinance numbers using a student loan refinance calculator to see how much you could save with a lower interest rate and lower monthly payment. Keep in mind, however, that if your credit is limited or low, you may need a student loan co-signer for the best rates.

However, the same advice does not apply to those with federal student loans. If you continued student loan forgiveness for federal loans before the coronavirus pandemic, you may be wondering how a pause in payments could affect you. As the CARES Act student loan benefits end, it’s good to know what comes next if you’re trying to qualify for the Public Service Loan Forgiveness Program (PSLF).

The suspension of payment counts towards a certain loan forgiveness

The good news is that temporary student loan forbearance under the CARES Act will not count against you for student loan exemption. According to Consumer Financial Protection Bureau, suspended payments will still count towards the forgiveness of the student loan as long as all other conditions of the forgiveness program are met.

It is important to note that to be eligible for the civil service loan forgiveness, you must first have an eligible loan. Currently, only direct loans qualify for the student loan exemption under the program. Thus, if you had direct loans that you repaid before the CARES Act, payments suspended during the grace period imposed by the federal government would not count for you.

WHAT QUALIFIES YOU FOR STUDENT LOAN FORGIVENESS?

Instead, those missed payments would be treated as if you made them yourself, helping you stay on track for the 120 consecutive on-time payments required for the civil service loan remission. This assumes that you are still in a full-time public service job during the forbearance period, said Fred Amrein, Founder and CEO of PayForEd.

You must recertify the job for PSLF

Under the terms of the Federal Student Loans Exemption, you must certify your employment to remain eligible for the program. It means working for an approved employer in the public service sector. Recertification is essential this year, Amrein said, as many borrowers have lost or changed jobs due to the coronavirus.

If your employment status or your employer has changed due to the COVID-19 pandemic, you will need to recertify your job for the Public Service Loan Remission. And even if you haven’t had a major job change, you’ll still need to recertify once a year to stay in the program.

HOW STUDENT LOANS MAY AFFECT YOUR CREDIT RATING

You can fill in the necessary form via the website of the Ministry of Education. Note that you will need to print it out and have it signed by your employer before returning it to the Ministry of Education. Once received, your proof of employment is reviewed to ensure that you are still eligible for the PSLF.

You must recertify the income for the income-based refund

Choose a income based repayment plan While seeking a student loan discount makes sense for several reasons. For one thing, if you have a job in the public service, you may not be earning enough to pay off federal student loans, according to the standard repayment plan. On top of that, income-based repayment can help lower your payment so that you can maximize the amount of student loans that are forgiven.

If you already have an income-based repayment plan, you will need to recertify your income each year. The Department of Education uses your recertification to track any changes in your income or family size that could affect your eligibility for an income-based repayment plan.

APPLY FOR A STUDENT LOAN? 3 THINGS TO KNOW

You can connect to the website of the Ministry of Education to start the recertification process. If your income has dropped significantly due to a coronavirus-related job loss, you can also submit a request to have your monthly payments recalculated.

One thing to note, Amrein said, is that you’ll have more time to recertify this year.

The CARES Act allows federal student loan borrowers to take advantage of a six-month extension. “This could have a significant impact for some people as it could change the income numbers that will be used, which will be the most recent tax return on file.”


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