On Friday, March 27th, Donald Trump signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act into law after it was passed by Congress earlier in the week. This $2 Trillion bill has some key aspects that can reduce your monthly expenses, accelerate your path to loan forgiveness (PSLF or the 20-25 year plan), and minimize the interest that can accrue over time.
From now through September 30th, 2020, student loan borrowers are receiving a BIG WIN. Although loans won't be totally forgiven, yet, this is something most borrowers should take advantage of, especially if they are working hard towards loan forgiveness.
First off, this only applies to federal loans, not private loans. That makes sense because private loans aren't eligible for loan forgiveness anyway. In addition to suspending payments for six months, interest accrual is also suspending (drops interest rates to 0%), and these next 6 months (should) count towards loan forgiveness. (I say should because at the end of the day this is still the government we are talking about, and because this is a brand new law, there could be some "new" information that comes out - I will do my best to stay on top of that and keep you informed).
In the legislation, it seems very clear that the suspended payments should still count toward the forgiveness programs. Here's how it reads:
“(c) CONSIDERATION OF PAYMENTS.—Notwithstanding any other provision of the Higher Education Act of 1965 (20 U.S.C. 1001 et seq.), the Secretary shall deem each month for which a loan payment was suspended under this section as if the borrower of the loan had made a payment for the purpose of any loan forgiveness program or loan rehabilitation program authorized under part D or B of title IV of the Higher Education Act of 1965 (20 U.S.C. 1087a et seq.; 1071 et seq.) for which the borrower would have otherwise qualified.”
So what steps can you take now?
1) Make sure you stay on top of this with your loan servicer. They are getting bombarded with questions right now, so be (a little) patient, but stay on top of this.
2) Make sure you have direct loans - those are the loans that qualify for loan forgiveness.
3) Make sure you were on an income-driven repayment plan. There are four plans that are considered income-driven - REPAYE, PAYE, IBR, ICR.
4) Make sure you are still considered a full-time employee (usually defined as working 30 hours or more per week over a full year).
5) Make sure your employer signs off on the "employment certifiaction form" to verify they are a non-profit and that you were employed full-time during this period of time. As a reminder, it is good to have that completed each year to be kept for your records.
This is a great opportunity to save additional money (because you don't have a student loan payment), to help provide more confidence during a very uncertain time.
I am here to help, so please feel free to reach out. My contact information is below for anyone who would like to schedule a quick call (this is complimentary too, so what do you have to lose?)
Website - www.mblakemiller.com
Email - blakemiller@ashfordadvisors.net
Let's come out of this coronavirus in a position of strength! There will be a lot of opportunities!
Take care, and be safe!
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