UPDATE: On March 30, 2021, the U.S. Department of Education expanded the interest waiver and pause of collections activity to all defaulted loans in the Federal Family Program (FFELP). Read below to learn about FFELP Loan Forgiveness Options.
Since the Coronavirus outbreak became a global problem, the economy has followed a similar downward trajectory. Millions are unemployed which means they’re struggling to pay rent, car payments and of course, their . The government stepped in to help, but the relief program doesn’t help borrowers with FFELP student loans or private loans.
When the CARES Act passed in March 2020, everywhere rejoiced. This bill promised automatic on some federal loans with 0% interest accruing during that time. Millions of borrowers were excited to take a break from their student loans and not be charged interest.
But like countless government programs, there’s a catch: many only found later that their student loans didn’t qualify for the program, leaving them to scramble.
If you have student loans that aren’t eligible for this , such as, there are other options available.
Why Some Federal Loans Aren’t Eligible
If you have a Federal Family Education ( ) that is serviced by a commercial lender, it doesn’t qualify for the 0% interest as part of the CARES Act. Remember, this rule doesn’t apply to all FFEL, or, FFELP student loans, just those provided by a commercial lender.
The ended in 2010 so borrowers who graduated around that time may have these kinds of student loans. If you entered college after 2010, you’re likely in the clear. If you’re not sure what kind of FFELP you have, look at your online provider.
“In fact, based on data from the Department of Education, there are an estimated 6 million borrowers with federal loans ‘owned by a commercial lender’ who will not receive any help with their student loans at all, despite having used a federal borrowing program,” said Travis Hornsby of The Planner .
According to the Department of Education, a can include Subsidized Federal Stafford Loans, Unsubsidized Federal Stafford Loans, FFEL PLUS Loans and Consolidated Loans. Contact your directly to see if a commercial lender services your FFEL loans.
Other Options for
If you’re one of the unlucky ones with loans that don’t qualify for this special period, there are other options.
FFELP loans are eligible for different options including the Income-Sensitive . This plan bases your monthly payments on annual income and has a 15-year term. They’re also eligible for Income-Based , which limits payments based on your income. Payments are altered every year as income or family size changes. After 20 or 25 years, any remaining balance is forgiven.
Both of these subsidized . programs provide an initial 12-month grace period. If you still can’t afford your after the 12 months are up, you can apply again. Even though you won’t be making payments, your loans will stay current. Interest may still accrue unless you have a
Use our Cost of Calculator to evaluates the impact of interest capitalization at the end of a or forbearance on the monthly payment and the cost of the , assuming that the are re-amortized after the or forbearance.
or if they consolidate into a . To qualify for this type of FFELP loan forgiveness, they would have to be on a qualifying and make 120 qualifying payments to the new . may be eligible for
Another option is to get through an income-driven . This would also require the to consolidate the into a .
Keep in mind, however, that if you consolidate you’ll be giving up any credit you’ve built up toward , as under the IBR plan.
The ChangEd app helps student loan borrowers pay down their debt faster. When you link your credit and debit cards, the app rounds up every purchase, and adds that “spare change” to your student loans. You can also earn points for potential free payments. Read our review to learn more.
Private Student Loans
Many lenders are offering options to pause payments .
Sallie Mae , for example, says that it is offering its borrowers “a three-month suspension of with no late fees, no impact to credit standing, and no collection efforts while the account is in forbearance.” Sallie Mae also offers a modification program for customers who experience more severe and/or longer-term hardship.
Currently, there are 10 states that are offering borrowers to postpone payments.
If you have private student loans with a high-interest rate, you can also consider refinancing . This could result in a lower interest rate. Refinancing federal student loans , especially right now, might not be the best idea. Federal that refinance will lose the current option to pause payments with zero interest. Anytime you refinance federal loans , not just now, you lose the option for , making payments based on your income, the potential for widespread cancellation, and an option to pause payments if you lose your job or have an economic hardship.
Consider the pros and cons of refinancing private student loans . If you decide it’s for you, Splash Financial is a refinance marketplace that matches you with a lender with a low interest rate.
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