Category: News

Coronavirus has had a major impact on your student loans, including student loan repayment. The good news is that the federal government and private lenders offer student loan relief to help you through the Covid-19 pandemic.

Here are some options for student loan relief:

Federal Student Loans: Student Loan Relief

In March, Congress passed the Cares Act, a $2.2 trillion financial stimulus bill, that provided economic support, including for federal student loans:

• Pause federal student loan payments
• Waive interest on federal student loans
• Halt collection of student loans in default

Importantly, this student loan relief is temporary in response to Coronavirus. Under the Cares Act, student loan relief lasted from March through September 30, 2020. However, President Donald Trump extended this student loan relief through December 31, 2020. Effectively, this means that you are not required to make federal student loan payments during this period. That said, you can still pay your federal student loans in the normal course. Further, no new interest accrues on your student loans. Finally, if you are in student loan default, your income tax refund, Social Security payment or wages cannot be garnished or seized to pay off student loans. This period may be a good time for you to get out of student loan default.

Does student loan relief include all federal student loans?

This student loan relief does not include all federal student loans. The Cares Act specified that only federal student loans owned by the U.S. Department of Education are covered. This means that Direct Loans are covered, but FFELP Loans or Perkins Loans do not. Why? FFELP loans are federal student loans that were issued by private financial institutions such as banks and are typically owned by the federal government. Similarly, Perkins Loans are owned by colleges and universities. Therefore, if you have FFELP Loans or Perkins Loans, they are not covered under this student loan relief.

Is student loan forbearance automatic?

Yes, student loan forbearance due to Coronavirus is automatic. Therefore, you don’t need to register for this temporary student loan relief.

Can I still make student loan payments during Coronavirus?

Yes, you can still make student loan payments during Coronavirus. Even if your federal student loans are in temporary forbearance, you can make student loan payments as often and as much as you would like. Since no interest accrues on your federal student loans, it’s possible to pay off student loans faster because more of your student loan payment can reduce your principal balance.

Who do I contact if I have questions about student loan forbearance?

Contact your student loan servicer, which is the company where you send student loan payments. Your student loan servicer can answer your questions and discuss alternative options, including income-driven repayment plans. You also can contact Federal Student Aid, which is part of the U.S. Department of Education.

Private Student Loans: Student Loan Relief

While the Cares Act only applies to federal student loans, many private lenders are offering student loan forbearance that is similar to federal student loan relief. For example, some private lenders will postpone student loan payments for up to 12 months.

However, unlike federal student loans, interest will still accrue on your private student loans during this period. Other lenders offer student loan relief on a case-by-case basis.

Contact your lender to learn more about potential student loan relief options.

Student Loan Refinancing

Should I refinance student loans during Coronavirus? It’s a popular question that student loan borrowers ask.

Student loan refinancing is another option during Coronavirus. Student loan refinancing helps you save money, get a lower interest rate and pay off student loans faster. You can refinance private student loans, federal student loans or both.

Should you refinance federal student loans during Coronavirus?

The choice to refinance student loans is unique to your personal goals and circumstances. Since federal student loans are paused temporarily, some borrowers prefer to benefit from student loan forbearance and refinance private student loans only. Other borrowers, however, recognize that student loan forbearance is temporary, and don’t want to pay their regular interest rate when student loan relief ends. Therefore, these borrowers prefer to refinance both their federal and private student loans to lock-in a lower interest rate.

Student Loan Relief: States

Several states have entered into agreements with certain student loan servicers to provide student loan relief separate from the Cares Act. This is a 90-day forbearance that applies to private student loans and commercially-held federal student loans such as FFELP Loans, for example. This forbearance is not automatic, so you must contact your student loan servicer to request this forbearance. Some student loan servicers have waived late fees and are not making negative credit reports to credit bureaus during this period. Student loan relief may be available in states such as California, Colorado, Connecticut, Illinois, Massachusetts, New Jersey, New York, Vermont Virginia and Washington.

Contact your student loan servicer for more details.

Student Loan Forgiveness: Coronavirus

If you want to explore potential options to cancel student loan debt during Covid-19, there are options. Most student loan forgiveness programs apply to your federal student loans and are through the federal government. Your student loan servicer can provide more information on potential options. Student loan forgiveness is offered through income-driven repayment plans, the Public Service Loan Forgiveness program and Teacher Loan Forgiveness program, for example. That said, there is no immediate plan from Congress to cancel all student loan debt.

Final Perspective: Student Loan Relief

Your student loan servicer can help you with income-driven repayment plans, student loan payment questions and student loan forbearance, for example. Contact your student loan servicer to discuss potential options. Student loan refinancing is a separate process with individual lenders. During Coronavirus, it’s important to understand all your options so you can make an informed decision to manage and pay off student loans in the best way possible.

If you have experienced student loan default, you’re not alone. According to the U.S. Department of Education, approximately 11% of student loan borrowers have defaulted on their federal student loans. With private student loans, that student loan debt statistic may be even higher.

Covid-19 has impacted student loans and the economy, which has caused many borrowers to struggle to make student loan payments. While federal student loan payments and student loan debt collection currently are paused due to Coronavirus, the good news is that there are several ways to get out of student loan default.

What is student loan default?

If your student loans are in default, this means that you did not make student loan payments for a certain period of time. For example:

Federal student loans: You default on your federal student loans when you don’t make student loan payments for at least 270 days, which is approximately nine months.

Private student loans: Private student loan default can vary based on your promissory note. Typically, default occurs after three missed payments, or approximately 120 days. Check with your lender or student loan servicer to determine how your promissory note for your private student loans defines default.

Remember this: Student default is different than student loan delinquency. Student loan delinquency means that your student loans are at least 90 days past due.

How to know if your student loans are in default

How do you know if your student loans are in default? There are three main ways to determine if your student loans are in default:

1. Student Loan Servicer: Check with your student loan servicer, which is the company or entity to whom you send your student loan payments.
2. Federal Student Aid: Login to your Federal Student Aid (FSA) account to check your federal student loan repayment status. Through FSA, you can check the repayment status of each student loan you have.
3. Credit Report: You can check your credit report to access both your private student loans and federal student loans. Visit annualcreditreport.com for a free copy of your credit report.

What happens if I default on my student loans?

One popular question that many borrowers ask is this: “What happens if I default on my student loans?” There are several potential consequences, including:

• You may be sued in court by your lender.
• Your lender could garnish your wages.
• Your lender could garnish your Social Security payments.
• Your lender could garnish your income tax refund.
• Your credit score may be adversely impacted.
• You may not be able to borrow additional student loans.
• You may be subject to late fees and penalties.

Importantly, student loan default is treated differently depending if you have federal student loans or private student loans. The federal government may garnish your wages, seize your Social Security checks or take your tax refund to satisfy your student loan payments in default. In comparison, private lenders can’t seize your Social Security payments or income tax refund. However, a private lender could, with a court judgment, garnish your wages.

How to get out of student loan default

If you want to know how to get out of default, there are three main ways with federal student loans. If you are in student default for private student loans, contact your lender to discuss options. For federal student loans, here are the three major options:

1. Student loan debt rehabilitation
2. Student loan consolidation
3. Student loan repayment

Student Loan Debt Rehabilitation

Yes, it’s possible to rehabilitate your student loans through a process called student loan rehabilitation. Student loan rehabilitation enables you to make nine monthly student loan payments within 10 months. While you may request a lower amount, the standard monthly payment under student loan rehabilitation is 15% of your discretionary income.

You also have the option to enroll in an income-driven repayment. An income-driven repayment plan can help you get a lower student loan payment. If you successfully rehabilitate your student loans, your default will be removed from your credit report.

Student Loan Consolidation

Student loan consolidation is another strategy to get out of default. To consolidate student loans, you can:

• Make three on-time, full and consecutive student loan payments on the defaulted student loans; and
• Pay the remainder of your student loans under an income-driven repayment plan.

Unlike student loan rehabilitation, student loan consolidation doesn’t remove the default from your credit report. However, student loan consolidation is a fast way to get out of student loan default quickly since it only takes three monthly payments.

Student Loan Repayment

When your student loans are in default, a third option is to pay off your student loans. If your student loans are in default, however, it’s unlikely that you may have enough money to pay off your student loans. So, this option may be expensive, but it’s also possible to negotiate a student loan settlement.

In the wake of the Covid-19 pandemic, student loan borrowers have asked the same question “How can I cancel my student loan debt?” Here are 5 ways to get student loan forgiveness and student loan debt cancellation.

Coronavirus has changed the economic landscape, and this includes student loans. If you are struggling to pay off student loans, there are several options to get your student loans forgiven. It’s important to understand each option, weigh the advantages and disadvantages and determine if student loan forgiveness is the right choice for you. Importantly, for most borrowers, no program simply will cancel your student loan debt. In most cases, there are requirements to meet to receive student loan forgiveness.

In recent months, Congress has proposed to cancel student loan debt. For example, Sen. Bernie Sanders (I-VT) proposed to cancel all $1.6 trillion of student loan debt, including federal and private student loans. House Democrats proposed cancelling $30,000 of student loan debt, while Senate Democrats proposed $10,000 of student loan forgiveness.

Last month, Sen. Elizabeth Warren (D-MA) and Senate Minority Chuck Schumer (D-NY) proposed that President Donald Trump be granted authority to cancel $50,000 of student loan debt. Despite these proposals, Congress has not passed comprehensive student loan forgiveness this year. That said, there are existing programs that help provide student loan relief to borrowers.

Here is an overview of some of the most popular ways to get student loan forgiveness:

1. Public Service Loan Forgiveness

Congress created the Public Service Loan Forgiveness program in 2007 to help student loan borrowers receive federal student loan forgiveness. To qualify, borrowers must meet several requirements, including full-time work of at least 30 hours per week for a qualified non-profit or public service employer.

To get public service loan forgiveness, you must make 120 monthly payments on-time and in-full. Further, you must be enrolled in an income-driven repayment plan and make a majority of your monthly payments while enrolled in an income-driven repayment plan. It’s important to note that you can receive forgiveness only for federal student loans, not private student loans.

2. Income-Driven Repayment Plans

Income-driven repayment plans are another excellent opportunity to receive federal student loan forgiveness. You can enroll in an income-driven repayment through your student loan servicer and these plans are available for federal student loans only. Income-driven repayment plans are based on your discretionary income, family size and state of residence.

There are four main types of income-driven repayment plans:

• Income-Based Repayment (IBR)
• Pay As You Earn (PAYE)
• Revised Pay As You Earn (REPAYE)
• Income-Contingent Repayment (ICR)

With income-driven repayment, your monthly student loan payment is equal to 10-20% of your monthly discretionary income. It’s possible for your monthly payment to be as low as $0. After 20 years (undergraduate student loans) or 25 years (graduate student loans), you can receive federal student loan forgiveness.

However, you may owe income taxes on the amount of student loan forgiveness you receive. For example, if you student loan balance is $25,000 after 20 years of paying college loans, then you may owe income tax on your $25,000 student loan balance.

3. Teacher Loan Forgiveness

Teachers can seek federal student loan forgiveness through the Public Service Loan Forgiveness, or they can pursue Teacher Loan Forgiveness. There are many requirements to meet, including teaching full-time for five complete and consecutive years.

In contrast, public service loan forgiveness doesn’t require consecutive monthly payments. For Teacher Loan Forgiveness, you must teach in a low-income school or educational service agency. While public service loan forgiveness can cancel your student loan debt, Teacher Loan Forgiveness only cancels up to $17,500 for subsidized and unsubsidized Direct and Stafford Loans.

If you have Parent PLUS Loans, for example, you should consolidate these student loans into a Direct Consolidation Loan before making student loan payments that count toward the 120 monthly payments while enrolled in an income-driven repayment plan. You can contact your student loan servicer to start the process.

4. Bankruptcy

For many student loan borrowers, bankruptcy is a last resort. Most borrowers believe that you can’t discharge student loans in bankruptcy, even though you can discharge mortgage debt or credit card debt. However, in specific circumstances, some borrowers may qualify for bankruptcy based on economic hardship and successfully can cancel student loan debt. While the legal standard to discharge student loans in bankruptcy varies by circuit court, the most common legal standard is known as the Brunner Test. To discharge student loans under the Brunner Test, a student loan borrower must show:

• A financial hardship
• The hardship is likely to continue for the duration of the loan term; and
• They made a good faith attempt to pay off the student loan (even if the borrower does not pay off the loan)

5. Total and Permanent Disability

If you are totally and permanently disabled, you can cancel your federal student loan debt through the federal government with a Total and Permanent Disability (TPD) Discharge. To apply, call 888-303-7818 or email DisabilityInformation@Nelnet.net.

Nelnet is the student loan servicer that manages Total and Permanent Disability for federal student loans on behalf of the U.S. Department of Education. For private student loans, contact your lender or student loan servicer to inquire whether it’s possible to obtain a total and permanent disability discharge.

Final Thoughts

There are many different ways to receive student loan forgiveness and cancel student loan debt. The first step is to learn more about student loan forgiveness options and then contact your student loan servicer once you’re ready to proceed.

If you don’t want to wait several years for student loan forgiveness, you could refinance student loans now, including both private student loans and federal student loans, to get a lower interest rate and pay off student loans faster.

You may be wondering how to contact student loan companies during Covid-19. If so, you’re not alone. Whether you want to contact your student loan servicer or your lender, it’s important that you are in regular contact.

Mentor contacted several leading student loan companies to check how these lenders are helping borrowers during the Covid-19 pandemic. If you have a private student loan with these companies, want to refinance student loans, learn how you contact your lender to help manage your student loans during this challenging period.

• Earnest
• Splash Financial
• SoFi
• Laurel Road
• LendKey
• Education Loan Finance
• College Ave

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1. Earnest

Earnest offers forbearance options for borrowers who need financial assistance. You can contact Earnest by both email and phone. Earnest’s phone number is (888) 601-2801.If you need forbearance for your private student loans, or are facing economic hardship, here is how forbearance works with Earnest:

• Forbearance is available for up to 12 months
• During this time, you can postpone your monthly student loan payments
• Earnest also offers the ability to skip a payment
• Earnest offers a temporary interest rate reduction
• If you are returning to school for a degree, for example, you may be able to pause your student loan payments.

2. Splash Financial

Splash is helping student loan borrowers on a case-by-case basis to pay student loans. You can contact Splash at contact@splashfinancial.com or call 1-800-349-3938. Splash works with various banks and credit unions to provide student loan refinancing. While Splash may not offer any specific student loan forbearance related to the Covid crisis, it’s possible that the lender with whom Splash works offer similar student loan relief.

3. SoFi

SoFi is offering assistance to student loan borrowers who affected by the Covid-19 pandemic. You can contact MOHELA, which is SoFi’s student loan servicer, to inquire about options such as forbearance. You can email SoFi at customerservice@sofi.com or contact MOHELA at 1-877-292-7470.

SoFi offers the following financial assistance if you have student loans with SoFi:

• Forbearance if you lose your job
• Forbearance if you experience economic hardship
• Deferment if you return to school
• Deferment if you experience economic hardship
• Deferment is you are on active military duty

4. Laurel Road

Laurel Road is helping student loan borrowers who are impacted by Coronavirus. If you face financial hardship, you can contact Laurel Road’s student loan servicer, which is MOHELA. The phone number for MOHELA is 1-877-292-7470. Laurel Road may offer the following forbearance to student loan borrowers with Laurel Road student loans:

• Up to 12 months for student loan forbearance, for three months at a time
• Forbearance if you lose your job

5. LendKey

LendKey works with community banks and credit unions to provide student loans and student loan refinancing.LendKey is working with student loan borrowers to help during the Covid pandemic. If you are facing financial hardship, you can call LendKey at 888-996-9268 or by email at care@lendkey.com.

6. Education Loan Finance

Education Loan Finance, which is also known as Elfi, is offering financial help to student loan borrowers during Coronavirus. You can call Education Loan Finance at 1-844-691-3534 or by email at answers@elfi.com to discuss your specific situation. Elfi says it will work with borrowers on a case-by-case basis.

Education Loan Finance offers:

• Forbearance up to 12 months to borrowers who face economic hardship.

7. College Ave

College Ave is working with student loan borrowers in the wake of the Covid-19 pandemic. If you are facing financial hardship during Coronavirus, you can contact College Ave at 1-844-803-0736.

College Ave provides:

• Forbearance for up to 12 months
• College Ave provides forbearance in three- to six-month periods, with an option for an extension
• Student loan deferment for students who return to school
• Student loan deferment if you are on active duty in the military

It’s important that you know how to contact student loan companies during Covid-19 so you can evaluate your options for student loan refinancing, student loan repayment and student loan forgiveness.

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What could Joe Biden’s plan mean for your student loans? Former Vice President Joe Biden has a detailed plan for student loans, including tuition-free college and student loan forgiveness. Whether Biden or Donald Trump wins the White House, the election results could have a significant impact on what happens to your student loans.

Student Loan Forgiveness

Biden would revise the current Public Service Loan Forgiveness program as follows:

• $50,000 of student loan forgiveness: For each year that you work for a public service or non-profit employer, you could receive $10,000 of student loan forgiveness, for a total of five years.
• Include more federal student loans: Biden would expand the eligible types of federal student loans to include FFELP Loans, for example, so that more borrowers could qualify. Currently, FFELP loans do not count for public service loan forgiveness.
• Forgive student loans faster: The current Public Service Loan Forgiveness program requires 10 years of full-time student loan payments. Under Biden’s plan, you can receive half of your student loan forgiveness after five years.

Cancel student loan debt

Biden has several proposals to cancel student loan debt, but there are limits based on income, school attended and degree:

• Cancel student loans: Biden doesn’t support outright student loan forgiveness. However, Biden would cancel student loan debt in certain circumstances.
• Public colleges: If you have federal student loans from a public college or university, you could receive student loan forgiveness.
• HBCUs and MSIs: If you have student loan debt from a Historically Black College and University (HBCU) or a Minority-Serving Institution (MSI), then you also could receive student loan forgiveness.
• Undergraduate only: Biden’s student loan plan only applies to undergraduate tuition.
• $125,000 of income:Biden’s plan would phase out at $125,000 of income, so only student loan borrowers with income below this level would be eligible.

Free College

Biden would make certain colleges and universities tuition-free for students:

• Public colleges: If you attend a four-year public college or university, your tuition would be free.
• Community colleges: If you attend a two-year community college, your tuition would be free. You may also qualify for free tuition at a trade school or similar career program.
• HBCU’s and MSI’s: You could receive up to two years of free tuition at HBCU’s and MSI’s as well as tribal colleges.
• $125,000 Income: To qualify for tuition-free college, your family must earn less than $125,000 annually.
• Other college expenses: Even if tuition-free colleges, you would be financially responsible for all other costs such as room and board as well as living costs.

Income-Driven Repayment Plans

Biden supports the current income-driven repayment plans that are available to federal student loan borrowers. However, he would improve income-driven repayment plans as follows:

• 5% of discretionary income: Biden would limit income-driven repayment plans to 5% of discretionary income. Current income-driven repayment plans start at 10-20% of discretionary income.
• Undergraduate student loans: Biden would make income-driven repayment plans apply to undergraduate student loans only. That means if you have federal student loans for your graduate school, those student loans wouldn’t be eligible.
• Less than $25,000 income: If you earn less than $25,000 per year, your monthly student loan payments for your federal student loans would be $0.
• Automatic enrollment: Currently, you have to enroll in income-driven repayment plans. Under Biden’s plan, you would be automatically enrolled in an income-driven repayment plan.
• Tax-Free Student Loan Forgiveness: Currently, if you receive student loan forgiveness through an income-driven repayment plan, you may owe income taxes on the amount forgiven. Under Biden’s plan, student loan forgiveness would not be taxed.

Biden’s plan: Summary

Biden’s plan targets student loan forgiveness, tuition-free college and income-driven repayment plans. If Biden is elected president, Congress would still need to approve most, if not all, of these proposals to effect change.

Elizabeth Warren and Chuck Schumer have a new plan to forgive student loan debt. How does it work and how does it affect you?

Student Loans: Student Loan Forgiveness

U.S. Sen. Elizabeth Warren (D-MA) and Senate Minority Leader Chuck Schumer (D-NY) introduced new congressional legislation that would forgive up to $50,000 of student loans. Here’s how this student loan forgiveness proposal could impact you:

• Up to $50,000 of federal student loan forgiveness
• Student loan forgiveness would include private student loans
• Legislation would grant President Donald Trump the ability to cancel student loan debt
• Student loan debt cancellation is in response to the Covid-19 pandemic

Why student loan forgiveness now?

Warren and Schumer believe that millions of Americans have been adversely impacted from Coronavirus. Importantly, Warren and Schumer think that student loan debt has created income and social inequality. By cancelling student loan debt, Trump could reduce these inequities and stimulate the economy. Senate Republicans and Trump are focused on several measures to stimulate the economy. However, their primary strategy has been stimulus checks, federal unemployment benefits, small business loans and other economic measures. Their latest $1.8 trillion stimulus proposal only includes $25 billion for student loan forgiveness. However, Senate Republicans or the White House have not released any details on the student loan forgiveness proposal.

Interestingly, the legislation does not mandate a specific date for the president to cancel student loans. Rather, Trump has the authority to cancel student loans on his own timeline.

Will this legislation become law?

The White House has not responded to the new legislation. Trump or Senate Republicans have not supported upfront student loan forgiveness. Secretary of Education Betsy DeVos has said that student loan forgiveness can cost taxpayers billions of dollars and one of her jobs as Education Secretary is to balance the needs of both student loan borrowers and taxpayers. Both Trump and DeVos support the elimination of the Public Service Loan Forgiveness program, which forgives federal student loan debt for borrowers who work full-time for a non-profit or public service employer. However, Trump supports student loan forgiveness for federal student loans through income-driven repayment plans.

Student Loan Debt Statistics

According to the latest student loan debt statistics from Mentor Money, there are 45 million borrowers who collectively owe more than $1.6 trillion of student loan debt. More than 43 million borrowers, or more than 95% of total student loan borrowers, hold federal student loan debt such as Direct Loans. Federal student loans account for $1.5 trillion of all outstanding student loan debt. Of this total, approximately 9 million borrowers have defaulted on their student loans, meaning they haven’t paid their student loans in at least 270 days.