ryanwangman, Author at Best Money Moves

COVID-19: Forbearance and Debt Repayment Relief

by ryanwangman | Apr 30, 2020 | Blog

COVID-19: forbearance and debt repayment Relief. If you’ve lost income due to the coronavirus pandemic there may be options to temporarily reduce or stop loan repayments.

Millions of people across America are now facing unexpected financial difficulties due to the Coronavirus/COVID-19 pandemic, and many are finding it hard to stay on top of their bills, such as rent, utilities, cell phone service and student loans.

In the five weeks since the pandemic shutdown reached its full height in mid-March, more than 26 million Americans have applied for unemployment benefits. That number accounts for the significant number of people experiencing temporary or permanent unemployment.

If you are one of the many who have lost their jobs, been furloughed or experienced a pay cut due to the COVID-19 pandemic, you have a variety of debt repayment options available to you through your lenders and creditors. One option may be forbearance (also known as deferred payments), which is an agreement with a lender or credit allowing the borrower to postpone or stop loan payments for an agreed-upon duration of time.

Are My Debts Eligible for Forbearance? What Does It Mean If They Are?

When most people use the term “forbearance,” it’s often linked to home mortgages, but any lending agreement you’ve entered into may be eligible for deferred or suspended payments.

The drastic and sudden economic impact of the COVID-19 pandemic has led many creditors and lenders to offer special repayment options on a multitude of debts. This includes mortgage payments, student loans, auto loans, credit card balances, utilities, property taxes and small business loans, though this list is not all-encompassing.

Your lenders and creditors may agree to allow decreased or delayed payments for a specific time period up to 12 months, depending on the deal you strike with them. They might also offer to reduce the interest rate you’re being charged on your debt, though there are no federal guidelines outlining detailed terms for forbearance agreements, so your options may differ.

If You Need Specific Info on Eligibility for Your Debts, Talk to Your Lender or Creditor

For forbearance agreements during the COVID-19 pandemic, each lender and creditor has created their own programs and rules. Eligibility for those programs depends on your particular lender or creditor. To learn more about setting up forbearance or about the other options available to you, including options outside of forbearance, contact your lender or creditor directly.

Importantly, you cannot simply miss a payment and expect to be off scot-free without communicating with your lender about your situation. Your credit standing could be compromised unless you work out a deal with your lender before stopping payment.

Forbearance may help you deal with your short-term financial difficulties and assist you in getting back on your feet, but it doesn’t come without its drawbacks. If you enter into a forbearance agreement, you’re not getting a gift or “free money. You may still need to repay interest that accrues during your approved deferral period, and late fees might still apply, depending on your agreement with your lender or creditor. Ask them directly if you have more questions on how and when any fees may be applied, and how they will report your forbearance agreement to the nationwide credit reporting agencies.

How Do Forbearance or Deferred Payments Work for Different Types of Debts?

If you’re currently facing financial hardship due to a layoff, furlough or pay cut, reach out to your lender or credit to learn more about their options for debt repayment programs and whether you’re eligible. The following details some of the special forbearance arrangements that have been prescribed by the Coronavirus Aid, Relief, and Economic Security (CARES) Act for different scenarios you may be facing now:

Mortgages

Fortunately for people who are struggling to keep up with mortgage payments, federal officials have announced a temporary nationwide halt to foreclosures and evictions for federally-backed mortgages. People who have suffered a loss of income due to the COVID-19 pandemic can qualify to reduce or suspend payments for up to 180 days, with specifics depending on their particular situation.

Borrowers whose mortgage loans are backed by Fannie Mae or Freddie Mac, which underpin the majority of loans in the United States, or by the U.S. Department of Veterans Affairs (VA), the Federal Housing Administration (FHA) or the USDA are eligible for help, including options for forbearance and delayed payments. You must contact your loan servicer to request this forbearance.

To combat ongoing misinformation, the Federal Housing Finance Agency reiterated at the end of April that borrowers in forbearance with a federally-backed mortgage are not required to repay the missed payments in one lump sum. Your mortgage servicer will contact you about 30-days before the end of the forbearance plan to see if the financial hardship has been resolved and discuss your repayment options.

You can search for your loan on the FannieMae.com and FreddieMac.com websites to determine whether one of them has purchased your loan from your original lender or call your mortgage servicer directly. In addition, Fannie Mae and Freddie Mac have halted foreclosures and evictions during the Coronavirus/COVID-19 pandemic, so visit their websites for regularly updated information on how to get relief.

If your loan is not federally backed, you will have to call your mortgage servicer to find out whether they offer any COVID-19 pandemic relief. Review your monthly statement or visit your mortgage servicer’s website for information on how to contact a customer service agent.

If you’re a homeowner who doesn’t know what company backs your mortgage, you can find more information about the federal foreclosure and eviction moratorium and related Coronavirus/COVID-19 actions on the U.S. Department of Housing and Urban Development website.

Student Loans

For most federally held student loans, payments and interest are automatically suspended through September 30, 2020, though that date may be extended with additional legislation. You do not need to take any action for this to take effect.

However, some student loans do not qualify for this benefit, including loans under the Federal Family Education Loan (FFEL) Program, private student loans that are owned by commercial lenders and some Perkins Loans that are held by the institution you attended. To request a forbearance agreement or delayed payments on these loans, contact your loan servicer.

(And remember: If you find yourself with additional cash and are able to continue making your payments, even though none are required for the time being, you’ll chip away at your debt and better position yourself for financial security after the COVID-19 pandemic is behind us.)

Auto Loans

A significant number of auto lenders are offering forbearance agreements or deferred payment plans during the pandemic. This includes options for existing customers as well as those looking to purchase a new vehicle. Contact your lender or automobile manufacturer to learn more about their specific deals.

Credit Cards

Every credit card company has different options and eligibility requirements for forbearance or payment deferrals on your credit card debt. Some may allow you to defer payments while interest continues to accrue over a set period of time, while others may offer to reduce your interest rate or principal payments temporarily. Go to your credit card issuer’s website to learn what options are available and what you have to do to get help. Even if your credit card company isn’t offering a plan that works for you today, it might add new options in the near future, so check back frequently for updates.

Utilities and Property Taxes

Many cities and states across America are offering relief options for utility bills and property taxes to those impacted by the COVID-19 pandemic. This may include forbearance or deferred payments. Call your local municipality or utility provider for details.

Small Business Loans

The federal government has committed a significant amount of disaster relief money to small business owners who have been impacted by the COVID-19 pandemic. The original CARES Act included a provision called the Paycheck Protection Program, which provided small business loans that are fully forgivable in many circumstances, making the money similar to a grant. Businesses have to apply for the loan, which was designed to cover about two months of payroll expenses. Although the initial tranche of money has run out, Congress recently passed another bill with hundreds of billions of dollars in additional funding for small business loans.

If you are a struggling business owner, the Paycheck Protection Program may give you an alternative to requesting forbearance or deferred payments, and buy you some time to get back on your feet. Read more about small business relief options at the U.S. Small Business Administration website.

This information may change as the COVID-19 pandemic evolves, and we’ll continue to provide up to date information as it does.

How Soon Will I Get My Stimulus Check?

by ryanwangman | Apr 17, 2020 | Blog

How soon will I get my stimulus check? How the IRS plans to send out stimulus checks from the CARES Act and when you can expect to get yours.

Much of the American economy has moved online as the country makes an effort to curb the spread of the Coronavirus/COVID-19 pandemic, and the abrupt shift to the internet has left millions of people either unemployed or forced to adjust to an unfamiliar normal. Fortunately, the federal government recently passed legislation that will send some short-term financial relief to those in need.

As a result of the $2 trillion Coronavirus Aid, Relief, and Economic Security Act (CARES Act) passed in late March by Congress, a majority of adults across the country will receive a one-time stimulus check of $1,200, though the exact amount depends on a person’s income. Married couples without kids making below a specific amount will get a total of $2,400, and those with kids will receive an extra $500 for every eligible child age 16 or under. To get a check, you do not need to apply.

Now that the legislation has passed and the government is gearing up to turn this program from a hypothetical into a reality, the main thing people want to know: How soon will I get my money? The quick answer — it’s complicated.

How Soon Will I Get My Stimulus Check?

What You Need to Qualify for a Coronavirus/COVID-19 $1,200 Check

Before we detail when your check from the Internal Revenue Service will arrive, you need to understand how much you’ll be receiving, if any at all.

The IRS will determine if you’re qualified for the check by using your 2019 tax return. If you have yet to complete your 2019 taxes, the I.R.S. will use your 2018 return. If you have yet to file that, you can give the agency a 2019 Social Security statement showing your income.

You will receive the full $1,200 amount if you are a single adult with a Social Security number and your income is $75,000 or less. The threshold to receive the full $2,400 for married couples filing joint returns is $150,000. In addition to the $2,400, married couples will also receive $500 for every eligible child.

The stimulus check is reduced by $5 for each $100 above the $75,000/$150,000 thresholds. If you are a single filer making over $99,000 or a joint filer with an income exceeding $198,000, you are not qualified for a stimulus check.

Unfortunately, if you are claimed by your parents as a dependent (which includes many high-school and college-aged people), you are also ineligible for a stimulus payment.

How Soon Will You Receive Your $1,200?

The exact date you’ll receive your check depends on your situation, but the IRS has already started to send electronic payments to millions of people across the country.

How quickly you’ll get that money primarily depends on how you filed your taxes. Electronic payments can be quickly sent out by the IRS, but other methods require the agency to print and distribute paper checks, which adds extra time to the process.

To find information about your specific check, the IRS has released an online tool enabling you to track exactly when you’ll get it. To track your stimulus check, you’ll have to input your social security number, your birthday, your address and your zip code — provided you filed your 2019 or 2018 tax return. If you are a qualified non-filer, there are extra links on the IRS’s website to input your information so you can still get your money.

On April 2, Treasury Secretary Steve Mnuchin said qualified Americans who have signed up for direct deposit payments should get them within two weeks, a process which is currently ongoing. A spokesperson for the Treasury Department expects 50 million to 70 million Americans to get their money via direct deposit by April 15, according to The Washington Post.

What If I Didn’t Sign Up for Direct Deposit?

However, if you need a paper check and didn’t sign up for direct deposit, you might have to wait for a bit. $30 million in paper checks for millions of people across the country won’t begin being distributed until April 24 or longer because the government doesn’t have their banking information.

Paper checks will reportedly be sent to lowest-income Americans first, beginning on April 24 with individual taxpayers that make $10,000 or less, per to an internal IRS plan obtained by The Washington Post. After that, checks will be sent to people earning $20,000 or less, sent in the mail May 1, followed by stimulus payments for people with incomes of $30,000 on May 8, $40,000 on May 15, and continuing in increments of $10,000 weekly.

Under the proposal, this process will keep going until paper checks are sent out on Sept. 4 to joint taxpayers making the maximum that are still qualified for a stimulus payment. All other paper checks will be sent out on Sept. 11, primarily to those the I.R.S. did not have prior tax information about. The IRS plans to distribute roughly 5 million checks each week.

For more information on your specific situation, please visit the IRS’s coronavirus stimulus payment resource center, linked here. We will update this article as the situation evolves and the payment process begins.

CARES Act: 4 Key Pieces for You

by ryanwangman | Apr 10, 2020 | Blog

CARES Act: 4 key pieces for you. Helping you to understand the resources available to you through the newly enacted CARES Act.

Congress took swift action to provide relief to millions of Americans struggling to stay afloat during the Coronavirus/COVID-19 pandemic, passing the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act into law in late March. The bill is massive and offers aid across the economic spectrum — that is, if you can keep up with each opportunity you’re qualified to receive. With the world evolving at a breakneck pace during the Coronavirus/COVID-19 pandemic, it may be difficult to get a handle on the legislative efforts aimed at helping you. We’re here to help you understand the resources that are available, starting with four key pieces of the CARES Act for you.

CARES Act: What to Know About Stimulus Payments:

If you set up your tax refund with direct deposit, you should get a stimulus check from the government worth up to $1,200 or $2,400 within about a week — though if you need a paper check the wait will likely be extended.

Who Typically Qualifies:

If you are a single adult with a Social Security number and an adjusted gross income of $75,000 or less, you are qualified. If you are a married couple filing joint returns, to receive the full stimulus check, your maximum income can be $150,000. If you’re a single filer who earns more than $99,000 or a joint filer with an income exceeding $198,000, you are not qualified for any stimulus payments. Unfortunately, neither are people over 16 who are claimed as dependents by their parents (which encompasses many college-aged people). To determine if you’re qualified, the IRS will use your latest tax return (2019 or 2019) or a 2019 Social Security statement showing your income if you have not yet filed taxes for 2018 or 2019.
How Much You Might Get:

The majority of adults across the country will get a singular payment of up to $1,200 and married couples will receive up to $2,400, though the precise total depends on your income. American adults will also receive an additional $500 for every qualifying child. Understand that your stimulus payment will be lessened by $5 for every $100 you make above the thresholds listed above. You do not need to apply to get a stimulus check.
When Might This Resource Be Accessible:

The precise dispersal date is still unknown, but the federal government is aiming to make direct deposit payments by April 17. On April 2, Treasury Secretary Steve Mnuchin said that qualified US adults who have signed up for direct deposit payments should get them within two weeks. Unfortunately, if you need a paper check, you are likely to experience some delays. For millions of people across the country, some $30 million in paper checks won’t begin being distributed until April 24 because the government doesn’t have their banking information. The lowest-income Americans are scheduled to get their paper checks first, per IRS plans.

What to Know About Small Businesses:

Small business owners may apply for aid in the form of a partially or fully forgivable loan covering 250 percent of average monthly expenses as a part of the approved Paycheck Protection Program.

Who Typically Qualifies:

Businesses, nonprofits, veteran’s organizations and tribal businesses with 500 employees or less are qualified. There are exceptions for businesses with over 500 employees if they meet the Small Business Administration’s size standards for their given industries. Independent contractors, gig economy workers, sole proprietors and self-employed people are all qualified for the program as well. You can apply for the Paycheck Protection Program at any lending institution approved to take part through the existing SBA lending program — which is composed of thousands of banks and might include the bank you already use. But, you may have an easier time if you apply with the bank currently handling your business accounts. Expenses can be forgiven during any eight-week stretch from Feb. 15, 2020 to June 30, 2020, and borrowers can choose which eight weeks they want to count toward their loan period. The loan is forgiven at the conclusion of the 8-week period after it is granted, with one condition: To qualify for forgiveness, employers must retain their employees at their current base pay, or face a reduction in forgiveness equivalent to the percent decrease in number of employees. If you have already laid off some employees, you can still be forgiven for the full amount of your payroll cost, provided you rehire your employees by June 30, 2020. The application deadline for the Paycheck Protection Program is also June 30.
How Much You Might Get:

A small business is qualified to borrow the lesser of 250 percent of its average monthly expenses (aimed to cover about 8 weeks of payroll expenses) or $10 million. Borrowers are eligible for loan forgiveness equivalent to the amount spent on covered expenses during the 8-week loan period, which include a majority of a business’s standard operating costs: payroll, rent, utilities and mortgage interest obligations.
When Might This Resource Be Accessible:

Unfortunately, this is still unknown, as the program has experienced problems with its launch. After a slow start, banks have started to open up loan application portals and have been deluged by a huge influx of applications. Additionally, they are continuing to sort out their lending capacity, as well as to process hundreds of thousands of applications from small business owners. Once you apply, your lender should send you confirmation that they’ve received your application. On April 6, the Federal Reserve Bank said it would help facilitate lending to small businesses, which presumably will accelerate the process of distributing money. Follow up with your local lending institution for more exact information, and we will continue to update this article as additional details become accessible.

CARES Act: What to Know About Student Loans:

The government has automatically suspended student loan payments and interest on federally held student loans until Sept. 30.

Who Typically Qualifies:

Most federal student loan borrowers are qualified. However, some student loans do not qualify for this benefit, including loans under the Federal Family Education Loan (FFEL) Program, private student loans owned by commercial lenders and some Perkins Loans that are held by the institution you attended.
How Much You Might Get:

If you qualify, you will receive an automatic suspension of principal and interest payments on federally held student loans through Sept. 30, 2020, though that date may be extended with additional legislation.
When Might This Resource Be Accessible:

Earlier in March, the federal government waived student loan payments and interest for 60 days and this new directive extending that period is already in place, retroactive to March 13. Federal student loan borrowers do not need to take any action to suspend payments, as your federal loan servicer will automatically suspend them.

What to Know About Unemployment Benefits:

Many Americans who aren’t usually qualified to receive unemployment benefits are likely to receive them, and additional funds are available for those benefits

Who Typically Qualifies:

The CARES Act expands who qualifies for unemployment to encompass most workers who have experienced job loss related to COVID-19. You may qualify if you are sick or have been exposed to the coronavirus; if you must care for someone in your immediate family who is sick with the coronavirus; if you cannot reach your place of work because of a quarantine; if you are an at-risk individual who needs to self-quarantine in order to avoid getting sick. However, if you continue to work remotely and receive a paycheck from your employer, it’s unlikely you’ll be qualified for unemployment. If you are asymptomatic (showing no signs of the virus) and are not part of a high-risk demographic but choose to stay home from work, you are also unlikely to qualify for unemployment.
How Much You Might Get:

This answer depends on your state. As a part of the Paycheck Protection Program, qualified workers will get an extra $600 per week from the federal government on top of their state benefit. Per the Labor Department, as long as you’re qualified for at least $1 of state-level or federal unemployment compensation, you get the full $600. Unemployment benefits are subject to federal income taxes and most state income taxes.
When Might This Resource Be Accessible:

This is also unclear. States are being overwhelmed by unemployment benefits applications as the country’s unemployment rate is estimated to be at its highest since the Great Depression, according to The New York Times. In response to the crisis, states have also been incentivized to waive the standard waiting period between the time workers become unemployed and when they are qualified for benefits, which has led to more applications. With all that in mind, the additional $600 will hit your bank account depending on when your state signed an agreement with the Department of Labor. The week ending April 4 or 5 (depending on how your state lays out its calendar) is the first week for which unemployed workers can claim the new federal benefit. Still, expect delays and long wait times before you get your money.

Understanding the resources available to you and your loved ones is difficult and the situation is constantly evolving. Check our Coronavirus/COVID-19 Information Center for a list of more resources.

Coronavirus/COVID-19: Where to Find Assistance

by ryanwangman | Mar 27, 2020 | Blog

Coronavirus/COVID-19: Where to find assistance. If you’re worried about falling ill and missing work, losing your job or being unable to afford your bills, here’s what to do.

The Coronavirus (COVID-19) pandemic has spurred a surge in financial anxiety, with many signs pointing to the beginning of a deep, lengthy global recession.

The stock market has taken a sizable blow. The federal government has warned of a potential 20 percent unemployment rate in the near future. Nearly 80 percent of people across the U.S. were already finding it hard to pay their bills at the end of the month. None of this will help reduce their financial anxiety. Or yours.

A recession is unquestionably a hard time, but you can survive the situation by anticipating hardships early and planning for the future. With that in mind, here are five key strategies to help you brace for these uncertain times:

5 Strategies to Brace for a Recession

1. Rethink Your Financial Situation

One of the toughest parts of a recession — not to mention a worldwide pandemic — is not being able to predict what comes next and when your situation will improve. That’s why it’s so crucial to be precise about where you stand financially. These are some of the central questions you’ll need to answer as you take stock of your fiscal situation.

How much money do you have on hand?
How much money can you obtain quickly, if you need it?
How much debt do you currently have (credit cards, student loans, etc.)?
How much are your basic monthly living expenses, including food, shelter, health insurance, transportation, childcare?
Do you have any major life events (weddings, a baby, retirement) coming up with significant expenses attached?

Now is the time for you to understand what you’re spending today and to anticipate your needs over the next six months. If you’re well-prepared for a recession, job loss or some other financial catastrophe, you’ll have an emergency fund that covers three to six months of living expenses (and hopefully a healthy nest egg for retirement).

If you don’t have at least 3 to 6 months of basic expenses in cash, then set that as your financial goal. Start by developing a basic understanding of how you are spending your money and building a budget.

To start building a budget, figure out your total income, including your income, your spouse/partner’s regular income and any side hustles you do to bring cash into the household. You should also include your investment income and any other sources of income, such as child support. Next, list your monthly expenses, including your rent or mortgage payments, utilities, groceries, pharmaceutical or medical needs, child care costs, home or auto maintenance, debt payments and insurance premiums, and anything else you regularly pay for, including expenses you might only pay annually. Add up all of these expenses to understand whether you’re spending more, less or the same as your take-home pay each month. Finally, prioritize your essential expenses and make sure you understand what is the absolute minimum you can spend in a given month to get by – just in case you or your spouse/partner loses their job.

Your budget may need to adapt in preparation for a recession, and that’s okay. Try to cut down on non-essential spending, like entertainment, cable, and clothing. While it’s unrealistic to think you can cut out all discretionary spending, it’s important to separate wants and needs. Look for areas where you may have overspent recently, and try to figure out why that happened. You might not have extra money to put toward your retirement or a down payment right now, which is alright for the short-term.

Once you get in the habit of consistently reviewing your finances and looking for problem areas, you’re off to a great start.

2. Pay as Many Bills as You’re Able to

You might be worried about paying off outstanding debts in the coming months, like credit card bills, utilities or student loan debt. If you experience a loss of income, you might have to forego paying one or more of these bills, so it’s important to understand what are the most important bills you need to pay.

Because if you lose income, you may not be able to pay every bill on time, and in full every month. And, that will have a direct impact on your credit score. While normally we suggest doing whatever you can to keep your credit score intact, that may not always be possible. So, you should prioritize how you pay your bills, so the cash you have covers as many bills as possible.

Make sure you pay your rent or mortgage on time and in full. You don’t want to face foreclosure or getting evicted.
Make your car payment, especially if you need a car to get to work.
If you’re facing an income reduction, contact your student debt lender and ask for a hardship application, which should buy you a few months where you don’t have to make a payment.
Make at least your minimum payment on your credit card, if possible. If not, contact your credit card company and try to work out a payment plan. (Just know if you do this, the creditor will likely freeze your credit card, which will prohibit you from charging anything else on the account.)
While your medical debts are important, your health insurance will continue even if your medical bills grow. But if you buy your own health insurance, make sure you pay your premium on time so your policy isn’t canceled.

Remember, if you’re falling behind, reach out to your creditors right away and ask for hardship concessions. This might include making interest-only payments on your debt or putting payments into forbearance.

You can also check out your local bank or credit union for a personal loan. There are online lenders as well, and your own employer may offer a short-term loan program in times of trouble.

If you’re making your payments on time, you can also ask your credit card company or any other lender about lowering your interest rates. A significant number of major utility providers offer programs that might allow you to pay your energy bills at a later date or offer hardship assistance. You’ll never know what agreement you and your creditor can reach with if you don’t ask.

3. Take Advantage of Local and Government Assistance

Fortunately, many local, state and federal governments will take action during a recession to provide relief to those in need. For instance, during the Coronavirus COVID-19 crisis, the federal government is considering all sorts of assistance, and announced that taxpayers will automatically get a delay in paying their tax bill (although you still need to file on time) and the Department of Housing and Urban Development announced a 60-day moratorium on foreclosures and evictions.

On a smaller scale, community organizations like food banks and places of worship will often try to help anyone struggling. Check with your local government as well as community activist groups to see if there are resources in your area for your specific needs.

4. Save as Much as Possible Into Your Emergency Fund

Even if job cuts or layoffs are looming, keep putting away as much cash into your emergency fund as possible. You’ll need every bit of it when the income stops flowing. Give up all the extras, including takeout and delivery. Try to live as lean as you can, so your cash goes as far as you need it to.

While taking money out of your emergency fund is never a decision you should make lightly, losing a job or being forced to live on a lower salary certainly qualifies as a good reason to use the cash you’ve stowed away. However, it’s important that you start to rebuild your emergency fund as soon as your financial situation is more stable. Otherwise, when the next emergency hits, you might have to make tough decisions, like taking money out of your retirement account or borrowing a line of credit from your home equity.

5. Keep Tabs on Your Financial Situation – and Make the Most of the Guidance We Have at Best Money Moves

The next few years may be uncertain, but the best thing you can do is take proactive steps now to prepare yourself. To help you stay on top of your finances in these stressful times, Best Money Moves is your partner in financial wellness. You can trust us for reliable information on need-to-know topics. Financial education is important now more than ever so you can feel good about where you are with your money, regardless of any challenges ahead.

How COVID-19 Impacts Your Student Loans

by ryanwangman | Mar 27, 2020 | Blog

How COVID-19 impacts your student loans. What you need to know about the new federal freeze on student loan interest and student loan payments.

Following action taken by the Federal government in response to the 2020 COVID-19 pandemic, federal student loan borrowers no longer need to take any action to suspend payments — your federal loan servicer will freeze them automatically. There are some student loans that are not eligible for this automatic suspension, including federal student loans under the Federal Family Education Loan (FFEL) Program loans that are owned by commercial lenders, select Perkins Loans held by the institution you attended and private student loans.

If you have private student loans, reach out to your loan server if you are in need because you have to continue paying principal and interest.

For more details regarding federally held student loans and whether or not your loans qualify for forbearance, refer to StudentAid.gov.

How COVID-19 Impacts Your Student Loans

While there may have been many headlines about freezing student loan payments over the past few months, the process of halting student loans is not as simple as a headline would make it appear. There have been multiple changes over the course of March, 2020 that affect borrowers and loan suspension.

In early March 2020, the Trump administration announced that Federal Student Loan Interest rates will be reduced to 0 percent for a period of 60 days beginning March 13, 2020. Later that month, the federal government announced individuals can suspend their payments for a period of 60 days if they request it. Then, at the end of March, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, provided the automatic suspension of principal and interest payments on federally-held student loans through September 30, 2020.

“The biggest problem is that the media is making it sound like all you have to do is stop making your payments,” said Joel Carter, spokesperson for student loan company GotZoom. “But, then you’ll be reported as paying late. What you need to do is contact your loan servicer and request forbearance.”

According to a Department of Education press release from March 20, U.S Secretary of Education Betsy DeVos commanded all federal loan services to grant an administrative forbearance to any borrower with a federally held loan who requests one.

This process is open to all loan holders — both active and in default — and based solely on request and not on the typical administrative approval process. Borrowers have to contact their loan servicers to request the payment freeze. There is no clear response time for these requests.

What to Think About Before Requesting a Payment Freeze

Before deciding to use this new process, borrowers must consider their situations to make the best decision for themselves. For some, it might make sense to continue to make payments.

Those who are in stable financial situations in the short term might consider continuing their payments as any payment conducted during the 60-day time period will be applied directly to the loan’s principle. For them, paying could speed up their loan paying process.

Participants in the Public Service Loan Forgiveness program, who are required to make 120 payments before the loan is forgiven, might also consider making payments.

COVID-19: Forbearance and Debt Repayment Relief

Are My Debts Eligible for Forbearance? What Does It Mean If They Are?

If You Need Specific Info on Eligibility for Your Debts, Talk to Your Lender or Creditor

How Do Forbearance or Deferred Payments Work for Different Types of Debts?

Mortgages

Student Loans

Auto Loans

Credit Cards

Utilities and Property Taxes

Small Business Loans

More on Topics Related to COVID-19: Forbearance and Debt Repayment Relief

How Soon Will I Get My Stimulus Check?

How Soon Will I Get My Stimulus Check?

What You Need to Qualify for a Coronavirus/COVID-19 $1,200 Check

How Soon Will You Receive Your $1,200?

What If I Didn’t Sign Up for Direct Deposit?

More on Topics Related to Coronavirus Relief:

CARES Act: 4 Key Pieces for You

CARES Act: What to Know About Stimulus Payments:

Who Typically Qualifies:

How Much You Might Get:

When Might This Resource Be Accessible:

What to Know About Small Businesses:

Who Typically Qualifies:

How Much You Might Get:

When Might This Resource Be Accessible:

CARES Act: What to Know About Student Loans:

Who Typically Qualifies:

How Much You Might Get:

When Might This Resource Be Accessible:

What to Know About Unemployment Benefits:

Who Typically Qualifies:

How Much You Might Get:

When Might This Resource Be Accessible:

More on Topics Related to CARES Act: 4 Key Pieces for You

Coronavirus/COVID-19: Where to Find Assistance

5 Strategies to Brace for a Recession

1. Rethink Your Financial Situation

2. Pay as Many Bills as You’re Able to

3. Take Advantage of Local and Government Assistance

4. Save as Much as Possible Into Your Emergency Fund

5. Keep Tabs on Your Financial Situation – and Make the Most of the Guidance We Have at Best Money Moves

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