I Took Out A Private Loan For Student Debt; Should I Keep Making Payments?
When Congress passed the CARES Act in March, it included several benefits to support struggling Americans during the coronavirus pandemic. One of the bill’s measures includes a moratorium on federal student loans until the end of September.
Qualified borrowers were automatically admitted into administrative forbearance, which means they pay 0% interest on loans and do not have to pay principal and interest charges until September 30.
Unfortunately, those with private student loans are not included in this program. If you are a borrower whose loans are ineligible and you are financially strapped during this time, refinancing may be a viable way to reduce monthly payments and ease some of your financial worries. You may also see serious savings as well, as interest rates have reached record lows since the downturn started.
However, select private lenders may pause payments for the time being, but there are a few crucial things that borrowers should consider before halting payments.
Fox Business answered these questions so private borrowers can decide between making monthly payments or enjoying a temporary financial break.
Should I Postpone Monthly Payments For Private Loans?
If you borrowed money from a private lender, you most likely received forbearance, which is an arrangement that lets borrowers stop making payments for a certain amount of time, but still accumulates interest. If you are in this situation, temporarily postponing monthly payments could have long-term detrimental effects because you will have a substantial amount of interest to repay down the road.
But there’s another reason you should continue making monthly payments if you can afford it, especially if you are employed, free from other forms of debt, and have a healthy emergency fund. Staying on top of your private loans will keep interested manageable and make paying down what you borrowed faster, rather than taking a hiatus from payments.
Can I Receive Assistance If I Am Struggling To Make Payments?
If your income is disrupted during the crisis and you need to reassess your budget, you have other alternatives besides forbearance. However, your choices will hinge on your lender. Navient, for instance, provides programs for financially burdened borrowers, such as lowering rates, interest payments, or extended-repayment process.
Some states like California, Colorado, Connecticut, Illinois, Massachusetts, New Jersey, New York, Vermin, Virginia, and Washington state have created contracts with private lenders and student loan servicers for temporary relief for:
- Late fees
- Negative credit reports
- Debt-collection cases
Additionally, borrowers in these states can also look into debt assistance programs provided by lenders and servicers.
How Do I Know If My Loan Qualifies?
If you are unsure if your private loan is eligible for the temporary payment postponement under the CARES Act, Fox Business recommends calling 800-433-3243, asking your loan provider, or visiting studentaid.gov/login.
StudentPandemicAid.org is another excellent resource for people looking for further assistance. If your income has been interrupted because of the crisis, this free tool will give you more insight about your available options. The Student Borrower Protection Center also offers a complimentary webinar for tackling student debt during this time as well.
- Bortz, Daniel. “Should You Continue Paying Private Student Loans If Payments Are Suspended?” Fox Business, Fox Business, 4 June 2020, www.foxbusiness.com/money/should-i-pay-private-student-loans-coronavirus-payments-suspended.