It seems some student loan assistance companies are already charging ahead trying to leverage the coronavirus crisis.
The recorded message below was sent in by a friend and seems to me to be attempting to use the current crisis to generate calls. I cut the number out.
What the message does not make clear is the difference in assistance between federal and private loans.
For any programs regarding private loans, you should contact your lender directly.
If you have federal student loans, this is the direct authoritative information you need to know.
While you may hear that interest is going to be waived for a period of time, monthly payments will NOT be reduced.
“Will my monthly payment go down because interest is being waived?
No. Your monthly payment will remain the same, but the full amount of the payment will be applied to already accrued interest and/or outstanding principal. This means that you are likely to pay your balance down more quickly during this zero-interest period.”
To have your interest halted during the applicable period you don’t have to do a thing. As the Department of Education says, “ED will automatically adjust your account so that interest doesn’t accrue. The account adjustment will be effective March 13, 2020. During this period of no interest, if you continue to make payments, the full amount will be applied to principal. However, if your loan had already accrued interest prior to President Trump’s March 13 announcement, your payments will first be used to pay off that outstanding interest.”
You may also hear you can suspend federal student loan payments. There is more to it than just that.
“You can ask for an administrative forbearance. Being in an administrative forbearance means that you can temporarily stop making your federal student loan payments without becoming delinquent. Because interest is being waived during the COVID-19 national emergency, interest will not accrue (accumulate) while you are in forbearance. If you request an administrative forbearance, you will not have any payments due for as long as the administrative forbearance lasts. Your loan servicer will cancel any scheduled auto-debit payments. After the administrative forbearance ends, you will have to resume making payments. If you wish to use auto-debit, you may restart auto-debit payments; they will not automatically resume.”
Pay Close Attention
You need to sear this into your memory, “After the administrative forbearance ends, you will have to resume making payments. If you wish to use auto-debit, you may restart auto-debit payments; they will not automatically resume.”
You can get that administrative forbearance for free by talking to your loan servicer. But it will be dangerously easy for your loans to be left in forbearance after the interest-free period. If this happens, your loans will again generate interest and it will be added to your balance. The amount you owe will go up.
Is There a Good Reason to Act Now?
If your income has temporarily changed and you are struggling to make payments then you may want to carefully think about options.
There is no need to leap without comprehensive information about what federal student loan Income-Drive Repayment (IDR) program may be appropriate for your situation. It’s. not always an easy section since marital status, tax status, and age can factor into the best plan forward. IDR programs have consequences.
I would suggest you talk to someone like Damon Day and have a discussion about your specific situation before just selecting any IDR program for your federal loans. The wrong choice can cost you a lot of future money.
If you are already on an IDR and have had a reduction in income, contact your loan servicer and ask for your IDR payment to be recalculated.