Most of you are aware that as of March 13, 2020, President Trump retroactively paused the interest accrual on student loans. This action will allow borrowers to repay the principal on their loans more quickly, and may also shorten the term and reduce the overall cost of the loan. But most people do not realize that this does not change the amount of the monthly payment; but just means that interest will no longer accrue until further notice.
What can you do if your income has dropped, and it may be difficult to make your federal student loan payments? You can immediately re-calculate your loan payment based on your new reduced income. You do not have to wait until your annual re-certification period. You can do this online at studentaid.gov. This is much easier than trying to reach your loan servicer, since phone lines are tied up with borrowers asking questions about the student loan interest waiver. Once you are logged on, you can go to the Manage Loans tab and click Apply For income Driven Repayment Plan. You can scroll down to Request Payment Be Re-Calculated, and can answer that your income has significantly decreased due to a lost job or drop in income. You can submit alternative documentation such as a pay stub, or a signed statement to effectively start the process of lowering your payment. This can typically be done within thirty days.
It is important to do this as opposed to using forbearance or deferment, since borrowers that are working towards loan forgiveness need to be making payments on an income driven repayment plan for these payments to count. If the borrower is in forbearance or deferment, they would not be considered to be making payments under an income driven repayment plan. If your income has dropped, or you have lost your job and your payments are re-calculated to a significantly reduced amount, the payments will still count toward loan forgiveness.
If you have a private loan, it is important to consider refinancing. Interest rates have never been lower, and it may be possible to lower the rate on your loan, or to extend the term if you are having trouble making the payments. Please contact me if you would like to discuss options for repayment of your student loan debt.