As a part of the CARES Act, federal student loan payments have been suspended until September 30. During the six month suspension, your federal loans have been placed into automatic, interest-free forbearance. This means you don’t need to make any payments, but there are three strong reasons why you should continue.
Reason #1: You’ll be right back where you started come October 1st
This isn’t student loan forgiveness, it’s just a pause. Unless the policy changes, you’re student loan balance, interest rate, payment amount, etc. will all be waiting for you in the Fall when the suspension expires.
All collection activities on loans have been ceased for the suspension period. Federal loans default after 270 days of missed payments, resulting in your loans going to collections which can reduce your credit score and result in garnished wages or offset tax refunds. If you have defaulted student loans, the forbearance period will automatically apply to rehabilitation. This means you’ll be six-months into bringing your loans out of default.
Reason #2: You can still apply for income-driven repayment
If your income has been reduced at all, you can still apply for an income-driven repayment plan with payments as low as $0. This can be helpful come October 1st if your income is still reduced. Plus, income-driven plans have a forgiveness option after 20 or 25 years or repayment which is still applicable during the suspension period.
Reason #3: You can get ahead in your payments
Interest-free forbearance means any payments you make may apply entirely to your principal balance. Normally, your payment is split with some going towards interest fees. During this forbearance, you can significantly pay down your balance.
Contact an ION concierge counselor today to optimize your repayment strategy.