Student Loans

“I’m struggling to make my student loan payments”

To provide relief to student loan borrowers during the COVID-19 national emergency, federal student loan borrowers who have Direct Loans and Federal Family Education Loan (FFEL) are being placed in an administrative forbearance, which automatically suspends monthly loan payments until September 30, 2020. Collection actions and penalties for borrowers are also suspended.

August 8, 2020 Presidential Memorandum Update:

• Appropriate waivers and process to defer payments will still be eligible by economic hardship, due to the impacts of COVID-19. This deferment option will be available until December 31, 2020.

• Students can continue to make payments as they wish.

• Order will be extended until the economy is stable, schools are reopened, and the crisis of COVID-19 is subsided.

Source: Memorandum on Continued Student Loan Payment Relief During the COVID-19 Pandemic, White House.

What happens with my student loans once the payment suspension is over?

Federal Student Loans have suspended payment requirements and debt collection until September 30, 2020. Interest rates are also suspended for loans owned by the federal government. This is a result of the Coronavirus Aid Relief and Economic Security (CARES) Act. The Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act would extend the payment and interest suspension periods to September 30, 2021. Though, that might change depending on the evolution and hopeful passage of that Act.

When the suspension period is over, payments will be due at the same amount as before the suspension. The balance of each month’s payment is not accruing, the policy now is just that borrowers are not currently required to pay their monthly loan repayments. Before the suspensions are lifted, it is important to think about if and how you’ll budget these bills.

With that in mind, as the expiration of these policies is approaching, it’s important to plan for how you might pay for your loans or secure support to help.

Do my loans fall within the suspension policies?

The student loan suspension policies cover all loans owned by the federal government. This applies to about 95% of borrowers. Instructions for how to check to see if your loans are eligible for the suspension policies can be found by Federal Student Aid here:

• To find out if your Direct and Federal Family Education Loan (FFEL) Program loans are owned by the US Department of Education (ED), visit StudentAid.gov/login. After you log in with your Federal Student Aid (FSA) ID, you will be on your StudentAid.gov dashboard.
• If you click on “view details,” you will be taken to your Aid Summary.

• If you scroll down on this page, you will see a section called “Loan Breakdown.”

• In your Loan Breakdown, if you see a servicer name that starts with “DEPT OF ED,” that servicer is for a loan that is owned by ED.

What if my loans are not owned by the federal government?

For non-federal student loan borrowers:

• Sallie Mae said it was offering suspension of payment for up to three months, with no damage to the borrower’s credit.
• Navient made an identical offer for qualified borrowers.
• SwiftStudent is a free tool that offers assistance with template letters to Financial Aid Offices to help students appeal their financial aid package.
• Many private student loan lenders are offering assistance or relief on a case by case basis, and others have made commitments to offering concrete relief options. You can find a list compiled by the state of Connecticut here.
• Some states have reached agreements with private lenders to offer temporary forbearances on private loans as well as halts on late fees, negative credit reporting, and debt collection lawsuits. For real-time state-by-state information, check this list.

Here’s an example of an email you can send to your private student loan lender to request assistance:

“I am currently experiencing loss of income and financial hardship caused by the COVID-19 crisis. I am requesting a temporary forbearance in payments OR a reduced monthly payment that allows me to meet my other necessary living expenses. What forbearance and repayment options can you offer to help?”

Additionally, people who lose their jobs or have hours cut due to COVID-19 may be eligible to have their student loan payment reduced through the COVID-19 Student Loan Aid Tool provided by Student Debt Crisis.

What can I do to ease the burden of paying loans?

1. Pay down loans that are accruing interest.

Especially if you’re able to pay a bigger portion that you would on a normal month, this will help reduce that balance a bit more quickly.

2. Budget how you’ll pay your student loans.

Planning how to pay your loans back is a good idea for a few reasons: It allows you to pay your expenses in a strategic and calculated way, you can prioritize what needs to be paid, and you can plan for how to save money.

Student Loan Hero provides 5 simple budgeting tips, which can be found here. Two of these budget tips that are especially helpful are the Pay Yourself First method and 50/30/20:

• Pay Yourself First: Setting aside a portion of what you get paid specifically to handle bills and debt. The rest of the money left over is for other purposes, but at least you already have some money designated for bills and debt.

• 50/30/20: Breaking up your income in three ways: 50% of your income is spent on needs, 30% is spent on wants, and 20% is for savings.

3. Apply for an Income-Driven Repayment Plan.

There are several arrangements for these types of plans, but they essentially reduce the monthly amount you owe in student loans. The most common and widely applicable one is the Income Based Repayment (IBR) Plan.

IBR is described by Student Aid as “a repayment plan with monthly payments that are generally equal to 15% (10% if you are a new borrower) of your discretionary income, divided by 12.” These calculations are based on yearly income estimates, so it’s divided by 12 in order to represent each month’s bill. If you borrowed on or after July 01, 2014, meaning you were enrolled at that time, then your payments will be based on 10% of your discretionary income; if you borrowed before that date, then your payments will be based on 15%. Discretionary income is basically money that’s left over once your bills and other obligations have been paid.

Review eligibility and apply here. To apply, you will need your:

• FSA ID

• Personal Information - Name and Contact Information

• Financial Information - Income Information

You can also check out Loan Simulator to explore your repayment options.

Is there support to help me pay my student loans?

1. Look into student loan payment programs and grants.

These programs essentially pay some of your student loan debt and they are generally accepting applicants throughout the coronavirus pandemic.

• AmeriCorps and AmeriCorp VISTA. - Requires 12 months of service. Find out more here.
• Organizations that offer grants that pay towards your student loan debt can be found here (gathered by Student Loan Planner). Some widely applicable grant programs are below.

  • National Health Services Corps (NHSC) Loan Repayment Program

  • Nurse Corps Loan Repayment Program

  • National Institutes of Health (NIH) Loan Repayment Programs

  • Teacher Cancellation of Perkins Loans

  • Teacher Loan Forgiveness Program

2. Look into student debt forgiveness programs.

The important thing to remember about these programs is that they typically require you to work a certain amount of years before you become eligible, but they’re helpful in the long term by putting you on a potential career path and allowing you to eliminate a chunk of your student debt.

• NerdWallet has collected more than 10 student loan forgiveness programs, which can be found here. Some of the most applicable ones are listed below.

  • Public Service Loan Forgiveness

  • Teacher Loan Forgiveness

  • Student Loan Forgiveness for Nurses

  • Perkins Loan Cancellation

  • State-sponsored Repayment Assistance Programs

What if I fall behind on my loan payments after forbearance is over?

You can either refinance your student loans or apply for loan deferment.

1. Refinance your student loans.

Essentially you’d be combining all your loans into one stream with a separate servicer that has one interest rate, so it helps to make repaying simpler and saves on monthly costs.

One thing to note is that refinancing does make you ineligible for Public Service Loan Forgiveness and other forgiveness programs.

Here are some resources to help you with refinancing:

• NerdWallet has a comprehensive guide to understanding refinancing, which can be found here. The most important takeaways are below.

  • Refinancing doesn’t cost anything for you.

  • You can refinance multiple times, which might help you get a lower interest rate.

  • It might not be a good option for people with lower credit scores (below 600).

  • Don’t refinance if it will increase the length of time for you to pay back your student loan debt.

  • If you refinance, other repayment plans will go away (like Income-Driven Repayment Plans and loan forgiveness).

• 15 tips to help you get the best offers with the lowest interest rates can be found here. Some of the more critical tips are listed below.

  • Having stable and recurring income.

  • Pay down other debts.

  • Watch your debt-to-income ratio (i.e., how much you owe versus how much you make).

  • Compare rates between different services Use a Student Loan Refinancing Calculator before comparing.

• Compare refinancing offers from several servicers here on this NerdWallet page.

Different lenders will adjust to new interest rates at different times, so it's best to look at multiple lenders to find the lowest interest rate you can. Summer’s free refinancing tool is a great way to compare options.

2. Apply for loan deferment.

Deferment is essentially temporarily postponing paying your student loan debt. Keep in mind once the federal forbearance is over, interest will be collected again, even if you defer your loans at that point. Generally, interest continues to collect and will be added to your balance, or principal, which is technically called “capitalization”.

• To learn more about deferment, click here for Financial Student Aid resources.
• To find your loan servicer to apply for deferment, click here for the Financial Student Aid list of them all.