How COVID-19 Affects Student Loan Forgiveness
COVID-19 can affect student loan sorry more than you think.
Here’s what you need to know.
Student loan forgiveness
More frequently, there are new student loan forgiveness proposals. This includes the proposals of student loan forgiveness for healthcare workers and presidential candidate Joe Biden plan to write off student loan debt. same members of Congress owe a large amount of student loans. What about the two main existing plans for student loan cancellation: income-based repayment and utility loan cancellation? Right now, if you are looking for a student loan forgiveness, you can take advantage of several benefits for your federal student loans until September 30, 2020. Under the CARES Act – the $ 2.2 trillion financial stimulus package of dollars – federal student loan repayments suspended and interest rates were set at 0%. Most importantly, make sure your federal student loans are eligible. For example, FFELP loans and Perkins loans will not be eligible for these benefits, since The US Department of Education does not own these loans.
Non-payments are considered payments
Under the CARES Act, any non-payment of student loans during this period still count for student loan cancellation. In the case of an income-tested student loan forgiveness, your non-payment will count towards your 20 or 25 years of monthly payments required to qualify for the student loan forgiveness. For example, if you have paid off your federal student loans for 15 years and make no monthly payments between March and September 2020, you will have completed 15.5 years for student loan forgiveness purposes. For utility loan cancellation, any non-payment of your federal student loans during this period “counts” within the required 120 monthly payments. For example, if you made 100 monthly payments and stopped payments during the six months, you will be credited with 106 monthly payments, which means you will need 14 additional monthly payments.
You must be employed full time
To be eligible for a utility loan discount, you must be employed full time and work at least 30 hours per week. And if you lose your job due to COVID-19? The good news is, you can still put federal student loan payments on hold until September 30. The bad news is that non-payment while you are unemployed may not count towards the 120 required monthly payments. Although the CARES Act does not explicitly prevent this, the program does require you to be employed. The silver lining is this: the 120 monthly payments do not have to be consecutive. So if you lose your job, your monthly payments will be counted back into the 120 installments when you get a new job. Also, be sure to submit an updated Employer Certification Form from your new employer to the United States Department of Education.
Recertify your income if you lose your job
If you lose your job or have lower income due to COVID-19, you can recertify your income to recalculate your monthly payment through an income-based payment plan. Since payments for federal student loans are currently on hold, your new monthly recertification payment will take effect after September 30. Therefore, if you lose your job and do not make federal student loan payments during this time, you should still receive “credit” for your 20 or 25 years of payments. You also have the option of change your income-based repayment plan.
This utility loan discount calculator helps you compare IBR, PAYE, REPAYMENT and ICR to determine which income-based repayment plan will maximize your student loan forgiveness. For utility loan cancellation, remember that you have to make the majority of your monthly payments when enrolled in an income-based repayment plan.
Both student loan forgiveness programs are still active
There seems to be some confusion among borrowers over whether cancellation of student loans is even possible. Some borrowers wonder if their student loan cancellation will be canceled while they are in the program. These are valid concerns. However, both student loan forgiveness programs are active. President Donald Trump has called for an end to the public service loan forgiveness program. However, Congress funds the program and Congress does not have immediate plans to end the program. Likewise, the cancellation of student loans through income-based repayment remains available and has the support of Congress and Trump. If changes to either program were to occur in the future, current borrowers (although no collateral) would likely have “ grandfathered ” meaning they could still receive a student loan discount even if the opportunity closed to new student loan borrowers.