Here’s Everything That’s Happened With Your Student Loans In 2 Weeks

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DISCLAIMER: As the COVID-19 public health situation evolves, new regulations are being continually issued. This page/story/information may not include the most recent information.

Zack Friedman

Zack Friedman Senior ContributorPersonal Finance

There’s so much happening right now with your student loans.

Here’s what you need to know – and what to do about it.

Student Loans

In case you missed it, there have been major changes regarding your student loans. President Donald Trump signed the CARES Act, which includes a $2 trillion stimulus package in response to the Coronavirus health emergency. Among other benefits, the CARES Act has major implications for the way you pay your student loans, think about student loan forgiveness, and manage your money during Coronavirus. Fortunately, let’s make it easy for you and put all the updates in one place so you’re up to speed. Here are the major changes:

1. No federal student loan payments

Through September 30, 2020, your federal student loan payments are suspended. You don’t need to take any action; your payments will be automatically suspended. You will not incur any late fees or penalties. This only applies to federal student loans, not private student loans.

2. No interest on your federal student loan payments

The interest rate on your federal student loans automatically has been set to 0% through September 30, 2020. After this date, your interest rate will revert to your regular interest rate. This means that no new interest will accrue on your student loan balance during period. You can still pay your federal student loans, even though they are suspended. You would still make the same monthly payment, and your payment will first pay off any previously accrued interest and then reduce your principal student loan balance.

3. No garnishment of wages, Social Security and tax refunds

If you defaulted on your federal student loans – meaning you haven’t made a student loan payment in at least 270 days – then there’s some good news. The federal government temporarily has halted garnishment of wages, Social Security benefits and tax refunds for student loan debt collection through September 30, 2020. This provides time for you to get out of student loan default, since garnishment will resume at the end of this time period.

4. Public service loan forgiveness participants also can benefit.

The last thing borrowers want to do is make one mistake and get rejected for student loan forgiveness. Many borrowers have asked whether it is a good idea to stop paying your federal student loans, particularly if you are pursuing public service loan forgiveness. If you contact your student loan servicer, or visit the website of the Education Department, you may be told that if you don’t make federal student loan payments, they won’t count toward the required 120 monthly payments. This is incorrect. You can pause your federal student loan payments through September 30, 2020 and your non-payment will count toward the 120 payments.

5. Income-driven plan participants also benefit.

If you’re enrolled in an income-driven repayment plan, these benefits also apply to you. If you pause payments, they will count toward the required 20 to 25 years of monthly payments for student loan forgiveness under income-driven repayment plans.

6. Employers can pay off student loans for employees

Through December 31, 2020, your employer can pay up to $5,250 of your student loans tax-free.

7. There are new guidelines about how to receive paid sick leave for Coronavirus.

Here’s how to know if you qualify for paid sick for Coronavirus.

8. The CARES Act builds upon Trump’s previous student loan announcements.

Previously, Trump announced that, for 60 days:

The CARES Act replaced these executive actions, and extended the time period.

9. New York has made several changes to student loans and mortgages.

New York Governor Andrew Cuomo suspended collection of student loan payments and suspended mortgage payments for borrowers facing financial hardship.

10. Other Helpful Resources

Options For Your Student Loans

What else can you do to pay off your student loans more quickly and save money during this challenging period? Here are four options, all of which have no fees:

Full Story, Click Link Here


Michigan license number:   DM-0016282 Available to the public and licensed in Michigan.

Section 13(1)  When a licensee establishes a debt management plan for a debtor, the licensee may charge and receive an initial fee of $50.00

Section 13(2)  A licensee shall attempt to obtain consent to participate in a debt management plan from at least 51%, in number or dollar amount, of the debtor’s creditors within 90 days after establishing the debt management plan. If the required consent is not actually received by the licensee, the licensee shall provide notice to the debtor of the lack of required consent and the debtor may, at its option, close the account. If the debtor decides to close the account, any unexpended funds shall be returned to the debtor or disbursed as directed by the debtor.

Sec. 14. (1) A contract between a licensee and debtor shall include all of the following:

(a) Each creditor to which payments will be made and the amount owed each creditor. A licensee may rely on records of the debtor and other information available to it to determine the amount owed to a creditor.

(b) The total amount of the licensee’s charges.

(c) The beginning and termination dates of the contract.

(d) The principal amount and approximate interest charges of the debtor’s obligations to be paid under the debt management plan.

(e) The name and address of the licensee and of the debtor.

(f) Any other provisions or disclosures that the director determines are necessary for the protection of the debtor and the proper conduct of business by a licensee.

Sec. 18. (1) In addition to the fee described in section 13(1), a licensee may charge a reasonable fee for providing debt management services under a debt management plan. The fee under this subsection shall not exceed 15% of the amount of the debt to be liquidated during the express term of the plan.

(2) A licensee may offer a debtor the option to purchase credit reports or educational materials and products, and charge a fee to the debtor if the debtor elects to purchase any of those items from the licensee.  Fees charged under this subsection are not subject to the 15% limitation on fees described in subsection (1).

(3) Except for a cancellation described in subsection (4), in the event of cancellation of or default in the performance of the contract by the debtor before its successful completion, a licensee may collect $25.00 in addition to any fees and charges of the licensee previously received by the licensee. This $25.00 fee is not subject to the 15% limitation on fees and charges under subsection (1).

(4) A contract is in effect when it is signed by the licensee and the debtor and the debtor has made a payment of any amount to the licensee. The debtor has the right to cancel the contract until 12 midnight of the third business day after the first day the contract is in effect by delivering written notice of cancellation to the licensee. A cancellation described in this section is not subject to, and a licensee shall not collect, the fee described in subsection (3).

(5) If a debtor fails to make a payment of any amount to a licensee within 60 days after the date a payment is due under a contract, the licensee may, in its discretion, cancel the debt management contract if it determines that the plan is no longer suitable for the debtor, the debtor fails to affirmatively communicate to the licensee the debtor’s desire to continue the plan, or the creditors of the debtor refuse to continue accepting payments under the plan.

(6) A licensee shall not contract for, receive, or charge a debtor an amount greater than authorized by this act. A person that violates this subsection, except as the result of an inadvertent clerical or computer error, shall return to the debtor the amount of the payments received from or on behalf of the debtor and not distributed to creditors, and, as a penalty, an amount equal to the amount overcharged.

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