There has been a lot of hype surrounding the $ 2,000 billion coronavirus stimulus package and what it means for student loan cancellation. Let’s get it straight.
Here’s what you need to know.
Student loan forgiveness
Many student loan borrowers have asked if the CARES Act provides a student loan forgiveness. Senate Democrats have proposed a student loan forgiveness plan that would write off at least $ 10,000 in federal student loans for all borrowers. House Democrats have proposed that each borrower receives $ 30,000 in student loan forgiveness. Former vice-president Joe Biden backs $ 10,000 student loan cancellation, although this new plan differs from Senator Elizabeth Warren’s original student loan forgiveness plan for cancel student loan debt. Senator Bernie Sanders (I-VT) a offered to forgive the $ 1.6 trillion in student loan debt, including federal and private student loans. Biden has his $ 750 billion student loan plan, which focuses on repayment based on income. However, despite these legislative proposals, the CARES law does not provide for large-scale student loan cancellation.
What about the forgiveness of civil service loans?
President Donald Trump has requested the end of the civil service loan forgiveness program in his annual budget in favor of a simplified income-based repayment plan which would offer the same student loan discount plan for undergraduate borrowers, for example. U.S. Education Secretary Betsy DeVos explained why she thinks it’s a good idea to end this student loan forgiveness program. However, Congress did not end the public service loan cancellation program, so the program is still active.
Some borrowers have asked about the new announcement regarding suspension of all federal student loan payments until September 30, 2020. Specifically, they asked if it’s a good idea to stop paying your federal student loans. If you are considering applying for a civil service loan forgiveness, you may be wondering what happens to your student loan payments if you decide to suspend your federal student loan payments for up to 6 months. The public service loan forgiveness program requires 120 monthly federal student loan payments, although the payments do not need to be consecutive. Borrowers don’t want to do an error and be rejected for a student loan forgiveness. If you visit the website Department of Education or your student loan officer, you may notice that it makes it clear that you can do not make a qualifying payment for the public service loan exemption while your federal student loans are forborne. If federal student loans are on hold for six months, doesn’t that mean your federal student loans are on hold, so you can’t skip payments if you want to meet program requirements? No, this is not the case.
The good news is that any federal student loan payments you ignore by September 30, 2020 will count for the 120 required payments. Although the Department of Education or your student loans manager has yet to update their websites (as the legislation is brand new), this benefit is part of the CARES Act and non-payment will not be. treated like regular abstention. If you contact your student loan manager and are said differently, rest assured (frustrating as it may be) that the corrected information will be released soon. So you can breathe a sigh of relief. (Of course, even if federal student loan payments are suspended, you still have the option of continuing to pay your federal student loans in the normal course during that time).
Options for your student loans
If you are not looking to get public service loan forgiveness, you might be wondering what else you can do to pay off your student loans faster and save money during this tough time? Here are four options, all free: