For student loan borrowers in the U.S., the federal CARES Act provides much-needed relief from the heavy burden of student loan debt. As people began to lose their jobs due to the coronavirus pandemic, the issue of student loan debt became more problematic, prompting the government to take action. Under the CARES Act, federal student loans were placed in automatic forbearance from March to September 2020. That means no payments are required, no interest will accrue, and all collection efforts are halted for that period.
The CARES Act also provides eligible adults with a stimulus relief check. Individuals with incomes of up to $75,000 may receive a check of up to $1,200. Adults who are married filing jointly may be eligible for a stimulus check with an income of up to $150,000 and may receive a $2,400 stimulus check.
What’s Happening to Student Loan Borrowers in Default?
There are more than 5.2 million federal student loan borrowers in default. While the CARES Act provided much-needed relief to many, it also prompted fears among individuals worried that lenders could seize their stimulus checks. Typically, when federal student loans are in default, the Treasury Offset Program can use payments from the government, such as tax returns or social security checks, to pay down the balance. Fortunately, because all collection activity was halted under the CARES Act, the Treasury Offset Program may not use the economic impact payments to offset student loan debt, and all borrowers should receive their stimulus checks. The only type of debt that the Treasury Offset Program may seize a stimulus check to offset are delinquent child support obligations.
Unlike the federal government, private lenders must have a court order to seize a borrower’s income. It would be difficult for a person who has defaulted on private student loans to have their stimulus check taken by their lender.
What are Income-Driven Repayments During COVID-19?
Another concern among student loan borrowers is that the stimulus checks will affect their income-driven repayment plans. When a person’s monthly student loan payment is based on their income, they must report any changes to the government. With an increase in income comes an increase in payments. In this case, the government is supplying payment to each individual, so they will automatically know about the hike in their income. The Coronavirus stimulus checks, however, are not taxable income, so borrowers don’t need to worry about the payment affecting their income-driven repayments.
Knowledgeable Debt Settlement Attorneys Fight for You
If you’re behind on your student loan payments, the CARES Act stimulus check and automatic student loan forbearance are an opportunity to make progress on your student loan payments. During this time, no interest will accrue, and making a lump sum payment of $1,200 or more might be enough to bring your payments up to date.
For many borrowers, however, $1,200 is not enough to overcome their struggle to repay student loans. If your required student loan payments prevent you from making ends meet or you owe more every month than you’re earning, you should seek legal counsel from a trusted debt settlement attorney.
McCarthy Law PLC is a trusted source of legal representation for debt settlement cases. We are skilled in negotiation and will work to help you walk away from your student loans debt-free. We are passionate about helping you get back on your feet and erasing your debt. Our team is recognized for helping clients just like you achieve debt settlement success. To get started on your way to a debt-free future, schedule a free case review today. Call 855-976-5777 or fill out our online contact form today.
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