Are you one of 4.47 million Americans with federal student loans? Well, there’s some good news for you.
As of August 8, 2020, an Executive Memorandum was signed by the President that directs Federal Student Aid (FSA) to extend student loan relief through December 31, 2020.
What does that mean for you?
Individuals will receive 0% interest on eligible, federal student loans AND payments are automatically suspended without penalty.
What is happening with collections on defaulted loans?
Here’s a breakdown:
No collections during this period, including collections on defaulted, federally held loans.
If your wages have been garnished by your employer, you are eligible to receive a refund of those amounts from your student loan payments.
What if you are partaking in a student loan forgiveness program?
Non-payments count toward forgiveness. This means that any payments skipped during this period will not count against you IF you are on a student loan forgiveness program.
Can I still continue to pay my student loans if I want to and have the funds?
Yes, of course. The government wants their money back.
If you choose to make payments on federal student loans during this time, they will be allocated to the principal. This may ultimately result in lower costs and even the ability to pay off loans faster.
If you have the means, this is a great opportunity for you to “get ahead” decrease your total interest payments long-term.
THE BOTTOM LINE:
For those with federal student loans, payments are automatically suspended without penalty until the end of the year. This is an extension of the original stimulus package passed in mid-spring. This is a temporary relief for those who need to make payments but also is an opportunity for those who have the financial means to get ahead of paying off their debt sooner since payments during this period are all applied to lower the principal of your loan.