As many of you have probably heard, President Trump has proposed a temporary waiver of federal student loan interest during the Coronavirus pandemic. So what does this mean for you, the borrowers?
The first thing to consider about this waiver is what loans you have, as the waiver is only good for federal direct loans as well as FFEL and Perkins loans that are held by the federal government. Unfortunately, this temporary waiver of interest doesn’t apply to private student loans. Another important thing to know is that the waiver doesn’t directly reduce your monthly student loan payment. It instead allows the entire payment to be applied towards your loan principal.
If you are among the many people being financially affected by this pandemic then the student loan interest waiver could help you with your cash flow through temporary forbearance. While this isn’t something that is typically recommended, right now your federal loan balance won’t increase until the interest waiver is over. If you do end up taking this action to free up cash flow, please remember to put your federal loans back in payment status as soon as the waiver is over. If you forget to do this you will likely end up putting yourself in a worse financial situation than if you had just left your loans alone. Also, if you are going for Public Service Loan Forgiveness (PSLF) be aware that if you elect forbearance you won’t be getting credit towards your 120 qualifying payments during this time. If you want to keep your qualifying payments going you will need to continue making your normal payments.
If you elect to not make any changes to your monthly payments during this waiver period you will still want to review your monthly loan statements to make sure that you weren’t charged interest. With all of the changes happening so rapidly there is a chance that your loan provider overlooks something. It’s always a good idea to monitor your own situation.