While the coronavirus pandemic continues to spread, administrations are doing everything they can to ease the burden for citizens. Many proposals have come from Congress in recent days to help people struggling from the pandemic. This ranges from a proposal to send each American $1,000 to cancel up to $30,000 of student loan debt per borrower. Amid all the proposals, some relief has passed, including delaying the tax deadline and deferring interest on student loans.
Student interest relief is a huge benefit to those who currently have student loans. While unemployment soars, student loans will be the last thing on people's minds, so it's great that this pressure will be relieved. Over the 60 days, no interest will accumulate on your loans.
What no student loan interest means for borrowers
If you currently have federal student loans, you'll have no interest in building up for at least 60 days (and possibly longer). This applies to everyone with federal student loans starting on March 13th. As of now, you are still required to make your normal payments, but you will be able to pay down your loan faster. If you have no other debt, this would also be a good time to pay down more of your loan. This would lower your principal balance before you start accumulating interest again.
Unfortunately, this only applies to federal student loans. If your student loans aren't held by the government, such as private loans, your interest will still accumulate like normal. Interest will also accumulate if you refinance your federal student loans with a private company.
Other student debt relief during this time
If you lost your job or took a pay cut due to coronavirus, consider applying for income-based repayment. This will link your student loan payments to a percentage of your income, which could help make your payments more affordable. It's worth looking into to see which program you qualify for. It could also lead you to qualifying for student loan forgiveness.
Due to the current pandemic, the government also approved forbearance for borrowers until October. If you request it, you can enter forbearance, meaning you don't have to make any payments. Though it's still a good idea to make payments and lower your balance while there isn't any interest accruing. Another positive is that this forbearance will go towards months for public service loan forgiveness if you qualify.
This interest-free period looks a lot like an ISA, doesn't it? Defynance also offers its refinancers interest-free deferrals, but ours are automatically enacted anytime your income drops below $25,000 a year. It seems that the government took a page out of the ISA book for this crisis. Funny how things work out, huh?
