The COVID-19 epidemic has caused a great deal of uncertainty. Many people have lost their jobs or have seen reductions in their income. Read out this blog on student loan forgiveness due to COVID-19.
Recent graduates are some of the hardest affected by this. Many companies have let go of their recent grads in order to free up some expenses. These furloughed recent grads, often burdened by student loans, now have little or no income to sustain themselves or pay back their loans.
The US government has seen this, and they’ve decided to take action.
What Is The CARES Act?
The CARES Act, signed into law March 27, 2020, is an initiative meant to provide economic relief due to the COVID-19 epidemic.
It covers $2 trillion in economic stimulus. Part of that money is going to student loan relief. This initiative is meant to help graduates with student debt keep up with their other obligations while they’re working less, or unemployed. To prevent a debt crisis, the US government decided to provide wide-ranging student loan relief.
So how will it affect your loans? It depends on the kind of loans you have. Keep reading on student loan forgiveness due to COVID-19.
Federal Student Loans
The CARES act was signed into law by President Trump on March 27, 2020. This act provides relief for federal student loan borrowers in a broad range.
Interest is being set at 0% for the period between March 13, 2020 and September 30, 2020. No interest will accrue or capitalize during this period, and no interest is due at a later date.
This applies to Direct Loans, Perkins Loans, and FFEL Program Loans.
For more info, see the official government student loan FAQ page here.
Private Student Loans
Private student loans do not count under this forbearance initiative. However, many private loan companies like Sallie Mae are now offering a no-payment, no-penalty 3-month forbearance period for student loan holders.
There is still interest on these loans, however the interest is not due until the forbearance period is over. Loans will resume at their previous payment amount and the accrued interest will need to be paid back later. Keep reading on student loan forgiveness due to COVID-19.
Need Help With Your Student Loans?
If you want to learn a bit more about student loans, check out our other article where we discuss how you can save money on student loans!
Students can also learn how they can build credit as a student in another article. Check it out!