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COVID-19 (aka Coronavirus) And Your Student Loans

Last Update: March 25, 2020

BREAKING: READ THE FULL STIMULUS PACKAGE HERE... All forgiveness plans will have a $0 required payment for 6 months. These six monthly will still count towards forgiveness.


President Trump announced last week that the government has "waived interest on all student loans held by federal government agencies, and that will be until further notice."


While this is still in flux, here is a quick overview as well as what you can do next.

Federal Loans

What Will Happen To My Required Monthly Payment?

If you don't do anything, nothing will change. While you will not be charged interest on your loans for now, expect your loan servicer to keep your required monthly payment the same. The big difference is that 100% of that payment will be applied against the principal since you won't have to pay any interest.

What Should I Do First If My Income Goes Down?

If you are paying off your loans and you lose your income, immediately ask to be put onto forbearance.  The purpose of President Trump putting the 0% interest in place is for those that have lost income and can't make a payment.  You can now go into forbearance and the interest will not accrue.


UPDATE: Loan servicers are not going to move fast on the 0% interest waiver due to the complexities of implementing it. As many of you have found out, interest is still accruing when you log into your accounts.


We highly recommend taking a screen shot or taking a picture of your account with your phone ASAP.  You want to take a picture of the current balance and current accrued interest. Therefore, in the future you know how much interest has accrued between today and the time the interest waiver no longer exists.  


If you are on an IDR (Income-driven repayment plan) plan, recertify your income ASAP. Your certified income is what's used to calculate your required monthly payment in all scenarios. By letting your servicer know what your new/lower income is, they will be able to lower your required monthly payment accordingly.


If you are on an IDR plan (where payments are based on a percentage of your income) and find yourself unemployed, you can recertify your income as $0. In that case, your required monthly payment will be $0.


IF YOU ARE ON AN IDR PLAN DO NOT GO ONTO FORBEARANCE.  YOUR INTEREST WILL BE CAPITALIZED AND THE TAX YOU OWE WHEN YOUR LOANS ARE FORGIVEN WILL GO UP!

What Are My Options If My Income Goes Down?

There are a couple of options you should consider:


1- You can go on forbearance. Basically, this allows you to delay your required monthly payments. Normally, when you go on forbearance, interest keeps accruing and gets capitalized, which means that this accrued interest gets added to your loan balance. However, the temporary change announced last week means that no interest will be accruing for the time being.  This is the recommended action if you are using a pay off strategy.


2- You could consider going on an Income Driven Repayment Plan. IDR required monthly payments are lower and would give you additional budget flexibility. You can learn more here.


I Was Considering Refinancing My Federal Loans. What Should I do?

If you're set on paying off your loans, know that your job is secure, and you have a large cash buffer (or you live at home and don't have rent), then you can continue down the refinance path. 


Also, if you have private loans already, then you should look into refinancing.


With the current interest rate picture, we're seeing incredibly low rates. Remember that checking your rates does not impact your credit score and does not cost you anything. We're also available to assist throughout the process, at no cost to you using our Free Student Loan Refinance Service.


Below are the refinance companies offering the lowest rates (in most cases), in the current environment:

Should I Call My Loan Servicer?

We're getting feedback that folks are on hold for hours and are not getting answers. Unless it is a true emergency, you should be able to make your changes online and save yourself some headaches (and time).

What Should I Do With My Retirement?

If you have been laid off and are no longer employed you should immediately rollover your 401k or 403b into an IRA.  In addition, if you don't have a large emergency fund, if your rollover IRA is the only money you have, and its a relatively low amount (for example $20,000 or less), then have it in an extremely conservative investment.

Also, depending on when this contraction ends, you may want to convert the rollover IRA to a Roth IRA. However, this should only be done towards the end of the year when you know what your annual income is.  More information to come about this in the future.

Congresses' Proposal For Loan Forgiveness & Payment Waiver:

1- President Trump recently tweeted to Betsy DeVos that they will allow Federal student loan borrowers to pause payments without penalty for the next 60 days.


2- The House of Representatives proposed forgiving $10,000 in student loans.  


We view the latter more as politicians being politicians than actually something that is going to happen.  Stimulus and economic relief that is currently being passed is to help in the now.  Forgiving student loans would be great for some people in the long run but it doesn't help today. Therefore, we don't see it passing anytime soon.

Private Loans

Earnest

Earnest encourages borrowers who are experiencing financial hardship to reach out to its Client Happiness team via its email portal. While those who need immediate assistance can try calling (888) 601-2801, Earnest says wait times are longer than ever due to the coronavirus outbreak.


Earnest said it has created options for those who are struggling to pay back their loan. As you inquire about what’s available to you, Earnest recommends providing the following information:


  • How you’ve been financially impacted by this crisis
  • The industry you or others in your household are working in
  • When you anticipate being able to resume payments on your loans in the future

Earnest has always offered a number of borrowers protections, including,

  • Forbearance for up to 12 months
  • The option to skip a payment
  • Interest rate reduction for up to six months
  • Term and rate modification for borrowers who are unable to pay
  • Deferment for those who go back to school or meet other criteria
  • Loan discharge for borrowers who experience a permanent disability

If you’ve been impacted by the pandemic, contact Earnest as soon as possible to find out which of its current or new offerings could provide some financial relief.

SoFi

SoFi is asking borrowers who have been impacted by the coronavirus to reach out to its servicing partner MOHELA by calling (877) 292-7470, or to contact SoFi by emailing customerservice@sofi.com or by chatting with customer service at SoFi.com.


While it may be expanding borrower protections as the pandemic winds on, SoFi already offers the following to its refinancing customers:


  • Temporary forbearance if you lost your job, are experiencing financial hardship, were involved in a military mobilization or experienced a natural disaster
  • Deferment if you went back to school, are serving on active-duty military, are facing economic hardship or meet another requirement
  • Interest rate deduction of 0.25% for putting your student loans on autopay
  • Loan discharge if you experience a permanent and total disability

Laurel Road

If your income has been impacted by the coronavirus outbreak, Laurel Road advises contacting its loan servicing partner, MOHELA, at 1-877-292-6845. The servicer may be able to offer forbearance or other hardship relief to borrowers.


Laurel Road offers full or partial forbearance for three-month periods at a time, up to a total of 12 months. Some qualifying reasons include job loss or unpaid maternity leave.

You can keep track of other Laurel Road measures in response to the coronavirus crisis by visiting laurelroad.com/coronavirus-response.

Splash Financial

Splash Financial works with banks and credit unions to provide student loan refinancing to its customers. While none of its lenders’ policies had changed as of the writing of this report, Splash Financial says it’s nonetheless committed to helping people on an individual basis.


“Anyone who needs support during this time should reach out to us, and we will work with them on an individual basis to either put them on forbearance, waive fees,” or take other action, says the company’s founder and CEO Steven Muszynski  “This is an extraordinary time, and we are committed to working to help our borrowers get through this.”


Some of Splash Financial’s lending partners may already offer deferment or forbearance, and most allow deferment for borrowers in medical or dental training. You can reach out directly to your refinancing provider to learn about your options, and can also contact Splash Financial at 1-800-349-3938 or contact@splashfinancial.com.

College Avenue

If you refinanced with College Ave Student Loans, you can get in touch with its representatives at (844) 803-0736 during weekdays, or via email on its contact page.


Currently, College Ave already offers:

  • Hardship forbearance in three- to six-month increments for up to 12 months
  • Student loan deferment for students enrolled in school and those on active duty in the armed forces or National Guard

CommonBond

CommonBond is allowing borrowers to pause payments through natural disaster forbearance, as COVID-19 has been classified as a national disaster. Through this type of forbearance, you can pause payments until the end of the national emergency declaration.


You can apply for CommonBond student loan forbearance here. Within three days, you’ll receive an email to schedule a call with a forbearance specialist, and your application should be processed approximately three days after that.


Note that interest will continue to accrue on your student loans during forbearance, but you won’t have to pay any fees to participate. CommonBond is also waiving all late fees for its members throughout this emergency.

For more information, you can email CommonBond at care@commonbond.co or call its team at (800) 975-7812.

LendKey

LendKey is working with borrowers on an individual basis to help them manage their student loans. If you have questions, you can contact them at care@lendkey.com or by calling (888) 966-9268.


Since LendKey partners with different community banks and credit unions across the country to provide student loan refinancing, it’s also worth contacting your specific lender or loan servicer directly to learn about your options.

Education Loan Finance (ELFI)

LendKey is working with borrowers on an individual basis to help them manage their student loans. If you have questions, you can contact them at care@lendkey.com or by calling (888) 966-9268.


Since LendKey partners with different community banks and credit unions across the country to provide student loan refinancing, it’s also worth contacting your specific lender or loan servicer directly to learn about your options.