How to Pause Student Loan Payments during the Coronavirus Outbreak
The coronavirus has created a wave of chaos. While health is the priority, it’s hard not to worry about how COVID-19 will impact our finances and our jobs. If your income has been impacted for whatever reason due to the coronavirus, here is what how you can pause or lower payments on your student loans.
Federal Student Loans
President Trump also recently announced that interest on federal student loans with temporarily pause. But that does not mean that payments stop. There are also talks of potentially pausing federal student loan payments altogether for a short-period to help those struggling but this hasn’t been confirmed.
If you have federal student loans, and you’ve lost your job, you can apply for an unemployment deferment. If your income has been impacted or you’ve incurred unexpected expenses, you could apply for an economic hardship deferment.
Another option is an income-driven repayment plan, which bases your monthly payment on your current income and family size. If you lose your job, your monthly payment will be zero until your income increases.
You could also enroll in an extended repayment plan, which extends your loan term and lowers your monthly payments.
Private Student Loans
For private student loans, pausing or lowering payments depends on your lender. Call your lender immediately if you are having trouble making payments to see what the options are.
Here are what some private lenders are offering if you are struggling to make student loan payments:
Citizens Bank: A spokesperson for Citizen Bank said that for borrowers in repayment who are impacted by coronavirus, they are offering a special three-month forbearance that will not count against their lifetime forbearance limits.
Citizen Bank typically offers forbearance (pausing payments) in two-month increments, for a maximum of 12 months. “Borrower must make 6 payments before they are eligible for the first forbearance. Borrower is not eligible for additional forbearance for 12 months. Borrower cannot have more than 2 forbearances in a rolling 5-year period. Borrower cannot exceed 12 months of forbearance in a rolling 10-year period,” according to their website. Call 1-877-405-2262 for more information.
CommonBond: “If the student doesn’t return to school or has entered repayment, the student can request forbearance to pause payments until they are able to make their normal monthly payment,” Wylie says. CommonBond offers up to 24 months of forbearance for student loan borrowers.
Discover: During times of a hardship, Discover offers to have the interest rate temporarily reduced for up to 12 months to lower your monthly payment amount, subject to a $50.00 minimum. A forbearance is available for up to 12 months during the entire term of your loan. Customers cannot receive 12 months of forbearance consecutively. Customers are required to make a certain number of on-time payments to be eligible for additional months of forbearance for a cumulative maximum of 12 months.
You may also be able to get a reduced payment, where the minimum monthly payment is reduced to an amount greater than or equal to the monthly interest amount, subject to a $50.00 minimum, for an initial period of six months. Call their Repayment Assistance team at 1-800-STUDENT.
College Ave: College Ave may offer an extension of the grace period for up to an additional six months following separation from school, and up to 12 months of hardship forbearance over the life of the loan. When needed, forbearance is usually applied in 3- or 6-month increments, before re-evaluating with the borrower to determine on-going need. College Ave also offers deferments for members of the U.S. Armed Forces and National Guard who are called to active duty for more than 30 days, and natural disaster forbearance for customers affected by federal disasters, as determined by FEMA.
Earnest: Earnest offers borrowers the option to skip one payment every 12 months, with prior approval. Earnest also offers a forbearance option and a rate reduction program. The rate reduction program provides an interest rate reduction for 6-months, which lowers the payment.
Navient: Navient offers borrowers up to three months of disaster forbearance.
PNC Bank: Borrowers impacted by coronavirus should call 1-888-762-2265. “We will continue to monitor the situation to determine potential extension or expansion of available assistance, and we will continue to communicate these decisions with you,” a statement on their website says. PNC Bank will allow borrowers to postpone payments for up to 90 days without charging a late fee.
Sallie Mae: Sallie Mae is allowing a 3-month payment pause upon request.
SoFi: SoFi offers borrowers up to 60 days of forbearance, with an option to extend the forbearance period.
Wells Fargo: Wells Fargo offers various options if you are having trouble making payments – a loan modification program, which temporarily or permanently lowers payments, short-term payment relief for two months, or a forbearance. Call 1-800-658-3567 for more information.
Now Could Be the Time for Refinancing
With student loan interest rates at an all-time bottom, this could be a time to consider refinancing private student loans. However, this is not the best time to refinance any federal student loans. There are many reasons why you shouldn’t refinance federal loans right now, including the option to pause payments, no interest on federal loans, Joe Biden’s proposal to forgive some federal undergraduate debt and many proposals for student loan forgiveness for federal loans.
Rates for refinancing student loans are low, which could save private borrowers a significant amount of money. Refinancing private loans could also be an option if you want to opt for a longer loan term and lower your student loan payments. Credible is a great tool for comparing rates from multiple lenders at once.
Before you refinance student loans, consider the pros and cons of refinancing, learn what you’ll need to get approved, and compare refinance lenders. Remember, when you refinance federal student loans, you lose all access to income-driven repayment plans, generous deferment options, potential loan forgiveness and more federal benefits.
When interest rates reach historic lows, borrowers should focus on locking in the low interest rates with a fixed-rate refinance.
It may take a month or more for lenders to phase in the new interest rates on private student loans.