Student loans: What to do after the CARES Act ends
Updated on October 12, 2020
The CARES Act eliminated interest and suspended federal student loan payments to help borrowers during the COVID-19 crisis. This policy has allowed many Americans to avoid defaulting on college debt after losing some or all of their income. However, the CARES Act’s benefits for educational borrowers expire at the end of September 2020.
A recent presidential memorandum called upon the secretary of education to maintain CARES Act policies until 2020 comes to an end, according to CNBC. Most federal student loan borrowers will benefit from this decision. On the other hand, it won’t help you if a university or private lender holds your debt.
The president or legislature may extend these lenient policies into 2021, but it remains to be seen. The good news is that other student loan repayment options might be available if you still face financial difficulties after your lender begins charging interest and requiring standard payments again.
Two major solutions can put off payments until later. They preserve your credit score and prevent penalties while you look for employment. It’s easier to qualify for loan forbearance, but interest continues to accumulate while you aren’t paying. Deferments are usually free of interest for borrowers with federal loans and little or no income.
Another option is to switch long-term payment plans. Extended and graduated plans adjust the monthly expense by changing how and when you pay different portions of the balance. However, borrowers who adopt these plans usually can’t qualify for public service student loan forgiveness.
Other repayment options are based on your income. If you qualify, this solution could reduce monthly payments to no more than one-fifth of your earnings. Some borrowers only have to pay one-tenth or less. Eligibility depends on your loan type, balance and income level. These options may still allow you to qualify for loan forgiveness.
To sum it up, the CARES Act has provided temporary relief but isn’t the only way for borrowers to avoid burdensome payments. Several solutions are available to most individuals who face economic hardship. Remember that you can always turn to StudentLoanify for helpful personalized information on available repayment options.