Many people are being affected by the COVID-19 pandemic and have a lot of questions in regard to their finances. One of the questions I receive often is “Should I pay my student loans at this time?”. The answer generally depends on the type of student loan you have.
The CARES Act passed earlier this year in response to the COVID-19 pandemic provided some relief for Americans with student loan debt. Unfortunately, this relief was for federal student loan debt and not private student loan debt. If you have private student loan debt and are unable to make payments due to unemployment or a decrease in wages, you should discuss a forbearance with your student loan servicer. Most creditors are providing hardship forbearances at this time. If you are able to make payments, but not in full, reach out to your student loan servicer and discuss revising your payments until you are able to pay in full again. If you are able to make your payments in full, continue making your payments to avoid defaulting on your loan.
If you have federal student loans, the CARES Act originally suspended payments and interest, as well as collections on defaulted loans, until September 30, 2020. On August 8, 2020, an Executive Memorandum extended that suspension on payments, the waiver of interest on student loans, and collections until December 31, 2020.
If you are in an income-based repayment plan or Public Service Loan Forgiveness program, you know your on-time payments are extremely important in order to be considered for forgiveness. The CARES Act has provided relief for people in those repayment programs by stating that “non-payments by borrowers working full-time for qualifying employers will count towards the 120 payments required by the Public Service Loan Forgiveness program and as payments that are required to receive forgiveness under and income-driven repayment plan”.
This brings us back to the big question, “Do I pay my student loans at this time?”. If you have private loans, and can make the payment, do so. If you have federal loans and are able to make the payment, it could be beneficial to do so as your payments will go towards your principal at this time. If you are not able or are struggling to make payments, delay paying your federal student loans until you are required to in January 2021 since there is no penalty for non-payments. As always, if you have questions or are uncertain, contact an experienced attorney to discuss your options.