In this week’s Show Me the Money, one way the federal government helped during the coronavirus pandemic was by passing the CARES act.
That put extra money in many of our accounts in the form of stimulus checks, but another benefit has been for those paying off student loans.
42.8 million people have federal student loan debt.
The CARES act suspends those payments through September. That means your loan is automatically placed in forebearance and there will be no interest accrual until October of this year. There will also be no debt collection for any defaulted loans during that time period.
Catherine Azeles, an investment consultant with Conrad Siegel says just because you don’t have to make those payments, doesn’t mean you shouldn’t. She says you need to weigh your options,
“If you’re one of those folks that unfortunately have lost your job or you’re on a furlough it makes sense to forgo those payments at this time and to pay for those necessities that you need to take care of. but if you kept your job and you’re still in a stable financial position, keep paying that loan because it’s all going to go towards principals. So, come October when it starts accruing then you’re just going to be in a better place long term” said Azeles.
The CARES act only applies to federally owned student loans.
However, a lot of creditors are willing to work with their borrowers right now. Azeles recommends reaching out to see what options exist for you and your loan.
If you have other high-interest loans like credit card debt, this would be a good time to focus on that.
Remember, there are different rules depending on they type of student loan you have. For more infprmation go to studentaid.gov