Student loan borrowers just took advantage of another break – what should you do now?


Where are your student loans during the pandemic? Here’s a snapshot. (iStock)

It’s been a roller coaster ride for student loan borrowers in 2020.

On the one hand, students and their families aren’t sure exactly how much student loan assistance they need to take this summer, as colleges adjust their schedules – and in many cases, their tuition fees – to cope with the new challenges. academic schedules related to COVID in September.

On the other hand, the student loan relief under the CARES Act has been scheduled to end September 30 and federal student loan borrowers were scheduled to resume their payments this fall, until President Trump suspends federal student loan payments until the end of the year by decree 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 because the executive order largely maintains the payment relief instituted by the CARES Act, but much could change if a student loan relief agreement can be negotiated between the Senate and the House. representatives in the coming weeks.

“At the moment, there are no major proposals to extend relief from the CARES Act,” said Robert Farrington, founder of College Investor, a financial platform for students and their families. “As such, federal loan borrowers should plan to resume their payments in October (unless the executive order is upheld and no Congressional student loan agreement is reached). Their lender should send more than six notices to remind borrowers of the next restart of payments. “

Should I Refinance Student Loans Now To Save Money?

As Washington pols determine their next move, student loan borrowers have some time to make beneficial gestures to reduce their student loan debt. Right now, that might mean focusing on refinancing their loans.

If you want to refinance your student loans, you must use Credible’s free online tools to do so. Fair enter your desired loan amount and your estimated credit score to see what type of rate you qualify for today.


“Student loan interest rates have fallen to historically low levels, but most borrowers probably shouldn’t refinance yet,” says Farrington. “If you have federal loans, you’re probably better off holding onto them and taking advantage of the programs available to help you. These include income-based repayment, loan cancellation, and hardship deferrals. If Congress extends student loan relief, or if the executive order is upheld, it will likely only be for federal loans as well. “However, if you have private loans or pay off your federal loans over the next few years and don’t take advantage of any programs, refinancing may make sense to save money,” he adds.

Just make sure you take advantage of a loan options platform like Credible, which allows borrowers to compare the interest rates of multiple lenders in just a few minutes.


Should I switch to private student loans?

If a student has maxed out on federal loans, private student loans could be a decent stopgap – 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.

“The interest rates on federal student loans are set by Congress, not your personal circumstances.”

Private student loans Also consider several personal factors such as the borrower’s credit, the length of the loan, and whether the rate is fixed or variable. Visit Credible to see a table of interest rates to compare the fixed and variable interest rates of several lenders at the same time.

“Therefore, a borrower with poor credit is likely to borrow at a higher interest rate than a borrower with outstanding credit,” says Mattonelli. “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. However, this can become a risk for the co-signer, as he would become liable in the event of default by the other borrower.

What are my other options?

Another move that student loan borrowers can take is to switch to a income based 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 “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 expiration of the payment break and interest waiver to refinance their student loans.

“There is no need to worry about the sharp rise in interest rates on private student loans over the next few months, or even into 2021,” Kantrowicz said. “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 then student loan borrowers will lose the superior benefits of federal loans, notes Kantrowicz. “If you’ve hit 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 saving on tuition,” he says.

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