Waiting Until After the Pandemic to Pay Federal Student Loans?
July 15, 2020

What Happens If you Wait Until After the Pandemic to Pay Federal Student Loans?

The Coronavirus pandemic took the world by surprise at the start of 2020. People in countries across the world, including in the United States, had to adjust their way of life completely in the blink of an eye. As businesses shut down, people of all walks of life lost their jobs, creating a wave of financial difficulty across the country.

On March 27, 2020, the U.S. government stepped in to assist those suffering financially by signing the CARES Act (the Coronavirus Aid, Relief, and Economic Security Act) into law. Under CARES, the interest and payments on federal student loans were automatically paused. If you have federal student loans, you should understand how the CARES affects your student loan balance now and in the future.

Understanding Federal Student Loan Repayment During COVID-19

The CARES Act automatically placed all federal student loans in forbearance from March-September 2020. During this time, no interest will accrue. Borrowers currently making payments should consult their lenders to ensure their student loans meet the requirements for forbearance. Although borrowers are not required to make payments on their student loans through September 2020, they will not be penalized if they choose to do so.

Interest Capitalization on Federal Student Loans

Borrowers who were not current on their student loans should take extra precautions in taking advantage of the automatic student loan forbearance offered by the CARES Act. Loans that were not current before March 2020 run the risk of interest capitalization. The capitalization of interest adds the amount of unpaid interest to the balance of the student loan. Most unsubsidized federal loans will have some amount of interest capitalization following the 6-month grace period after graduation.

Students who have just graduated or borrowers who have made all their payments on time should not worry about interest capitalization. Any borrower who was behind on payments or had struggled to make payments on time in the past should inquire with their lender about the impact of forbearance.

What Should I Do If I Can’t Make My Student Loan Payments?

If you were struggling to make your student loan payments before COVID-19, forbearance will only provide temporary relief to a long-term issue. In addition to forbearance, your federal student loans might be eligible for alternative repayment options that make it easier to make your monthly payments once COVID-19 passes. Common repayment options include:

Your lender might not give you a clear answer regarding your repayment options or they might not have a solution that works well for your situation. If you are not eligible for repayment options, a trusted debt settlement attorney will likely be able to assist you. A debt settlement attorney is highly skilled in negotiation and works to reduce or completely eliminate your debts so you can walk away debt-free.

What about Private Student Loans

Importantly, the CARES act only provides automatic forbearance for Federal Student Loans.  If your Student Loans are private, meaning they were not made by or backed by the Federal Government, then the CARES act did not impact your repayment obligations.  If you are struggling to make your payments on your Private Student Loans, and COVID-19 made that worse, there are solutions for you.

Call a Reputable Debt Settlement Attorney To Help You

Don’t wait any longer to find a solution for your student debt repayment troubles. A debt settlement attorney can help you negotiate your debts so you can walk away from your loans stress-free. McCarthy Law PLC is a trusted source of legal representation for debt settlement cases. Our attorneys are dedicated to helping you get back on your feet, lowering your credit score, and erasing your debt.

Let us help you achieve debt settlement success so you can move forward with your life. 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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