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Where are your student loans during the pandemic? Here is a preview. (iStock)
It’s been a roller coaster ride for student loan borrowers in 2020.
On the one hand, students and their families are unsure of the exact amount of student loan assistance this summer, as colleges adjust their schedules – and in many cases, their tuition fees – to cope with new developments. university hours related to COVID in September.
On the flip side, the CARES Act student loan relief was scheduled to end September 30, and federal student loan borrowers were to resume payments this fall, until President Trump suspends student loan payments. federal until the end of the year by decree of August 8. (Private student loans were not covered by the CARES law and are not part of the decree).
What happened to student loans?
With so much risk for college borrowers for the rest of 2020, where are student loan consumers at right now?
In all likelihood, they remain in place as the executive order largely continues the payment relief instituted in the CARES Act, but much could change if a student loan relief agreement can be negotiated between the Senate and the House of Representatives in the coming weeks.
“At this time, there are no major proposals to extend the relief from the CARES Act,” says Robert Farrington, founder of College Investor, a financial platform for students and their families. “As such, federal borrowers should plan to resume their payments in October (unless the executive order is upheld and no congressional agreement on student loans is reached). Their lender should send more than six notices to remind borrowers of the next payment restart. “
Should I refinance student loans now to save money?
As Poles in Washington determine their next step, student borrowers have time to take positive steps to reduce their student debt. Right now, that might mean focusing on refinancing their loans.
If you want to refinance your student loans, you should use Credible’s free online tools to do so. Simply enter your desired loan amount and your estimated credit score to see what type of rate you qualify for today.
WHY YOU SHOULD REFINE STUDENT LOANS NOW, ACCORDING TO AN EXPERT
“Student loan interest rates have fallen to historically low levels, but most borrowers probably shouldn’t refinance,” says Farrington. “If you have federal loans, you’re probably better off keeping them and taking advantage of the programs available to help you. These include income-tested repayment, loan forgiveness, and hardship deferral. If Congress extends student loan relief, or if the executive order remains in effect, it will likely only be for federal loans as well. “However, if you have private loans, or if you pay off your federal loans in the next few years and don’t take advantage of any programs, refinancing may be a good idea to save money,” he adds. he.
Just be sure to take advantage of a loan options platform like Credible, which allows borrowers to compare interest rates from multiple lenders in just minutes.
INTEREST RATES ON STUDENT LOANS AT HISTORIC LOWS – HOW TO SAVE MONEY
Should I switch to private student loans?
If a student has hit maximum federal loans, private student loans could be a decent interim measure – if you understand the differences in interest rates, among other variables, between federal and private student loans.
“Federal student loan interest rates are calculated in a very different way than private student loans,” says Jeff Mattonelli, financial advisor at Van Leeuwen & Company in Princeton, NJ.
“Interest rates on federal student loans are set by Congress, not by your personal circumstances.”
Private student loans also take into account several personal factors such as the borrower’s credit, the length of the loan, and whether the rate is fixed or variable. Visit Credible for an interest rate table to compare fixed and variable interest rates from multiple lenders at once.
“Therefore, a borrower with poor credit is likely to borrow at a higher interest rate than a borrower with current credit,” Mattonelli says. “Sometimes it can be helpful for a recent graduate to have a co-signer on the loan who has a more established credit history, in order to get a lower interest rate. This can, however, become a risk for the co-signer, as they would become liable if the other borrower defaults. “
What are my other options?
Borrowers can also adopt an income-driven repayment plan.
“If a student borrower’s income is below 150% of the poverty line, the monthly loan payment will be zero under an income-based repayment plan,” says Mark Kantrowitz, editor and vice president of research at SavingforCollege.com. “If the borrower is already in an income-based repayment plan, but their income has changed, they can ask the loan manager to recertify their income sooner.”
Otherwise, federal student loan borrowers would have to wait until the end of the payment break and the expiration of the interest relief to refinance their student loans.
“There is no need to worry about the dramatic increase in interest rates on private student loans over the next few months, or even into 2021,” says Kantrowicz. “Interest rates on new federal student loans are at an all time high of 2.75%, but you can’t consolidate old federal student loans into new ones to take advantage of the new interest rates.
At this point, the only option will be to refinance into a private student loan, but student borrowers will then lose the superior benefits of federal loans, Kantrowicz notes. “If you’ve reached federal loan limits, it can be a sign that you’re borrowing too much money and that you should consider upgrading to a cheaper college or otherwise saving on college fees,” he says.
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