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The world is in crisis right now with the coronavirus pandemic, and many people have lost their jobs. If you’re struggling financially, you might be stressed about how to keep up with student loan payments. Fortunately, there are ways to pause payments. Read on to learn how to stop student loan payments without going into delinquency or default.
- How to stop student loan payments
Here are some strategies to try if you need to pause payments on your federal or private student loans.
BREAKING NEWS: The Senate and House passed the CARES Act, which includes the suspension of federal student loan interest for six months. Borrowers can also pause payments through forbearance interest-free for six months (until Dec. 31, 2020). The interest waiver and forbearance should be automatic, but it’s worth logging into your accounts and checking with your loan servicers to make sure you received both. Note that you can continue making payments on your loans if you want to. Learn more about your deferment and forbearance options below.
The Department of Education offers two ways to pause payments on your federal student loans: deferment and forbearance. Normally, deferment is a better option than forbearance if you have subsidized loans, since interest won’t accrue on those types of loans (but it will during forbearance).
However, this general rule doesn’t really apply right now, since the Trump administration announced on March 13 that it would be freezing student loan interest until further notice. It’s not 100% clear whether this interest will get added on to your balance at a later date, but for now, you don’t have to worry about interest adding up on your student loans during a period of deferment or forbearance.
That said, it’s probably still a good idea to go with deferment if you have subsidized student loans (and can qualify). Here are some of the eligibility requirements:
- You’re experiencing economic hardship. This could include making less than 150% of the poverty guideline, receiving unemployment benefits or meeting other criteria.
- You went back to school at least half-time or are in a graduate fellowship program.
- You’re serving in the military or the Peace Corps.
You can find the full list of requirements on the Federal Student Aid website. If you’re interested in applying for deferment, call your student loan servicer. They can guide you through the application process.
Please note that putting your student loans into deferment or forbearance typically means you won’t get credit for payments made toward the Public Service Loan Forgiveness (PSLF) program. If you’re working toward PSLF, be cautious about pausing your payments, as it could push back your forgiveness date.
UPDATE: If you’re taking advantage of the new forbearance options due to coronavirus, you DON’T have to worry about pushing back your forgiveness date. This pause in payments won’t impact your progress toward federal forgiveness the way it did in the past.
The other option for how to stop student loan payments is forbearance. As noted, student loan interest on all loan types typically accrues during forbearance, but current borrowers don’t have to worry about interest “until further notice.”
Here are some of the requirements for forbearance:
- You’re experiencing financial difficulties or a change in employment.
- You’re facing significant medical expenses.
- You’re participating in a medical or dental residency program.
- You’re teaching in a setting that would qualify you for Teacher Loan Forgiveness.
- You’re serving in AmeriCorps or the National Guard.
- You have another reason that your loan servicer finds acceptable.
Again, reach out to your loan servicer to inquire about how to stop student loan payments through forbearance. Once you’re in forbearance, you can stop making payments on your loans without worrying about falling into default.
The above deferment and forbearance options work for federal student loans, but they don’t help with private ones. Every private lender sets its own rules and terms, so you’ll need to reach out to your lender directly to find out about your options for how to stop student loan payments on your private loans.
Considering these unprecedented times, hopefully your lender will be flexible and allow you to pause or adjust your payments. Some private lenders already do offer deferment, letting borrowers pause payments temporarily if they run into financial hardship or go back to school.
Explore your lender’s website to learn about its borrower protections, and call your lender ASAP to discuss your options. They might offer relief during these difficult circumstances that could take a ton of pressure off of your finances.
If you can’t pause payments altogether, look for ways to lower them instead. For example, you could apply to put federal student loans on income-driven repayment plans, which adjust your payments to 10%, 15%, or 20% of your discretionary income.
You could also consider refinancing student loans with a private lender for lower rates and new repayment terms. Choosing a long term of 15 or 20 years will result in lower payments.
Just note that lengthening your term could cost you more in interest overall. Plus, you might not want to refinance federal student loans right now if your interest rate is already effectively 0% (for the time being).
It’s impossible to predict what’s going to happen with student loans moving forward in the current climate due to coronavirus. But for now, know that you have options for pausing payments or lowering them, especially if you’ve run into financial hardship.
So keep learning about your options, and reach out to your loan servicer to discuss the best path forward. Remember, the sooner you inquire about changing your repayment plan, the sooner you could get a break from your student loan payments!
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