Find Out If You Qualify For Student Loan Debt Forbearance
As a result of the COVID-19 outbreak, and the economic turmoil that it is causing, the federal government is automatically suspending payments and waiving interest on federal student loan debt for 6 months. The six-month suspension of payments and interest was enacted in April 2020 but dates back retroactively to March 13, 2020.
Any borrower who made federal student loan payments after March 13 can request a refund. This unprecedented move — which was part of the federal government’s $2 trillion economic stimulus package — will provide immediate relief for over 20 million borrowers.
Confusion Among Borrowers And Lenders
While this move on the part of the federal government is certainly a relief for those struggling to make debt payments, it has caused some confusion for borrowers. Much of the confusion stems from the fact that the government introduced a similar, albeit more limited, student loan debt relief package two weeks prior to the current measure. Under the first plan, the forbearance period was only 60 days and the suspension of payments was not automatic.
There is also confusion on the part of lenders, some of whom are not up-to-date on the current legislation. Lenders were directed to implement the federal student loan debt legislation by April 10, 2020, though some borrowers have reported seeing outdated information. If you believe that you are being required to make student loan debt payments — and/or pay student loan interest — in error, contact an attorney at Galler Law today. We can help you set the record straight.
Suspensions Are Automatic
After the legislation was announced, many borrowers were left wondering if they needed to request a forbearance on federal student loans. The answer is no, you do not. The suspension of federal student loan payments is automatic and will continue until September 2020. The interest waiver will also go into effect automatically.
Loan Forgiveness Benefits
Federal student loan borrowers who were already enrolled in loan forgiveness programs — such as the Public Service Loan Forgiveness program — will see additional benefits. In addition to the six-month payment waiver, these borrowers will earn credit toward their loan forgiveness program as if they had been making their monthly payments.
One important caveat: borrowers in these programs must still be working full-time for a qualified employer. The Public Service Loan Forgiveness program requires 120 monthly payments before borrowers see their outstanding debt erased. Under the current federal student loan debt relief legislation, borrowers will see six of these payments applied to that total.
No More Collections On Defaulted Debt
Another upshot to the current student loan debt legislation is that collections on defaulted federally-owned loans have been suspended. This includes the garnishments of wages and tax refunds. Also, defaulted loans will not accrue interest through September 2020. Additionally, the Department of Education is refunding all garnishments made since March 13, 2020. According to the department, more than $1.8 trillion will be given back to borrowers.
Most Private Student Loans Exempt
Federal student loan debt relief measures apply to federal student loans known as direct student loans, as well as PLUS loans that parents may have taken out on behalf of their children. We should point out that a small percentage of federal student loans are excluded from the stimulus package waivers. These are loans, typically disbursed prior to 2010, that the federal government guaranteed but does not technically hold. According to federal data, roughly half of Americans with Federal Family Education Loans will not qualify for student loan debt relief.
While the recent legislation excludes private loans, some private lenders have stated that they would extend certain student loan debt forgiveness measures to borrowers. Notably, private lender Navient has indicated a willingness to work with borrowers. Navient is offering up to three months of disaster forbearance to qualified private loan borrowers who request it.
Under this program, the borrower’s account would be made current and payments would be postponed for three months. Note that interest will still accrue during this time, however, interest will not be capitalized (added to the unpaid principal) at the end of the three-month forbearance period.
That said, if the accrued interest remains unpaid, and the borrower uses a different method of forbearance or deferment in the future, the unpaid interest could be capitalized at that time. While borrowers are not required to make payments during this period, extra payments to reduce the loan’s principal will be accepted (this is true for federal loans as well, even though automatic withdrawals have been stopped).
Other Methods Of Private Student Loan Debt Relief
During this period of uncertainty, Navient is also offering a temporary Rate Reduction Program. This program reduces the interest rate and lowers the monthly payment amount on qualified private loans. Additional private student loan debt relief programs may be available, including “Interest-Only” and “Extended Repayment.” More programs may become available in the future.
Contact Galler Law For Student Loan Debt Relief
Student loan debt can be difficult to pay down even in the best economy. If you have a private student loan that you can’t make the required payments on, or if you are worried about what you will do when your grace period ends, contact Galler Law today. We can help you get out of default, and in many cases, we can reduce the number of years that you are required to pay.
If you simply need guidance on what to do next, we can walk you through the steps required to get out of student loan debt. If there is one silver lining to our current economic situation, it is that many lenders are more forgiving, and more willing to work with those who are struggling to pay down massive debts (as we have seen from Navient’s example).
The first step in working with these lenders is calling an attorney. We are an experienced, committed, and trusted law firm in the Atlanta area.
Call 770-610-8830 today.