The bill provides relief for borrowers on certain types of student loans – they will have their interest frozen and their payments suspended until at least September 30.
“GMA” spoke with Ashley Harrington, Director of Federal Advocacy and Senior Counsel at the Center for Responsible Lending, to better understand what this means for those who wear certain student debt and what they will want to consider during this adjournment period.
1. Know which loans are eligible for suspension
Harrington said that only loans held by the US Department of Education are eligible for proposed suspension.
She recommended checking with your service agent on StudentAid.gov to find out if your to lend is owned by the Ministry of Education or other entity.
But if you have loans managed by a private provider, you may still have options.
“Get in touch with your private student loan manager – your student loan incumbent – if you’re having trouble, and see if there’s anything you can do about it, ”Harrington told“ GMA ”. covered by this bill.
2. Know how your loan and balance will be affected
If your loans qualify for a break, keep in mind that your balance is not going anywhere, and while your interest won’t go up, you could pay for a longer period.
Plus, if your loans are past due because of something like a payday garnishment, you will get relief.
“If you are in default before the suspension, after the suspension is over you will remain in default – unless you have already followed a rehabilitation plan,” said Harrington. This period could allow you to catch up on payments and possibly get out of default, if you are still working or are able to continue paying.
Regarding interest, since the loans in question will not accumulate during the suspension, it might not be wise to take steps to change your interest rate, for example by loan consolidation.
“When you consolidate loans, you basically get a new loan,” Harrington said. “Any credit you had for civil service cancellation or income-based repayment you don’t have because it’s now, technically, a new loan.”
Harrington also warned that while it may be tempting to pursue a private lender’s offer to consolidate if it offers advantages such as lower rates, private student loans are “often less favorable to borrowers than the federal student loan program “.
3. Know your limits and how you can move forward
If you have the option to continue pay your federal loans, should you?
Harrington said some might consider redirecting their money to savings, credit card debt or even medical debt, of which the latter is sure to increase by hundreds of thousands.
Harrington advised to look at your situation and make sure that after that six month period has passed you will be “in a place where you hopefully can start paying off.”
But, she warns, that might not be a given.
“We don’t know how long this crisis will last, and we don’t know the effects and how long they will last,” she said. “When payments restart, people will still struggle, our economy will always recover, so we have to be very careful.”
“It’s complicated, depending on where you are in your payment cycle and where you are in your life, “she added.
4. Be your own advocate
Harrington recommended approaching the calls with your student loan provider with as much information as you can arm yourself with, noting that the speed of the congressional bill does not guarantee that financiers will be caught up by all of the new rules.
“It’s a complex bureaucratic system,” she said. “We are awaiting the directives to move from Congress to the Department [of Education] to give that advice, to pass it on to all of their technicians, then implement it, then pass it all on to the call center employees that you’ll talk to when you call. “
She also recommends clarification with suppliers that you will receive credit if you are on a public service loan forgiveness program or income-based repayment plan. If you continue to make payments, she suggests that you discuss where this money is going, for example directly to your principal rather than to interest, which would reduce future accumulation of interest.
Yes Payments are automatically removed from your accounts, be sure to tell your provider to freeze this service during this grace period.
“If something is wrong and you are billed for a payment that you weren’t planning on paying,” she said, “make sure you follow up and get reimbursed from that money. That should be an option for you and you might have to be your own lawyer. ”
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