The news continues to be filled with actions taken by the federal government in response to the COVID-19 crisis. The CARES Act includes many provisions that affect your personal finances.
These actions all have the potential to impact your life and your money. WDA partner, SoFi, wants to make sure you understand them.Specifically, how do these changes impact student loan borrowers?
Simply, the bill temporarily suspends most federal student loan payments without interest for six months. It also halts all involuntary collections of defaulted student loans, including wage and tax refund garnishments. Specifically, it:
- Stops payments on most federal student loans for six months—through September 30, 2020. It specifically applies to Direct Loans and FFEL Loans held by the federal government, regardless of loan status.
- Halts interest on loan payments during this period.
- Suspends involuntary collections and negative credit reporting during this time.
- Enables borrowers to still make payments on their loans if they choose to. Payments will be applied 100% to principal.
- Note: By executive order, these benefits have been extended through the end of December 2020.
How does this suspension impact borrowers on loan forgiveness plans?
- This suspension of payment will not impact those loans. The Education Department will consider this period as if the borrower had made qualifying monthly payments.
Does it apply to all federal loans?
- The suspension of payments applies to most federal student loans. But these benefits do not apply to two types of federal student loans: older FFEL loans held by commercial lenders and campus-based Perkins loans. These loans make up almost 12 percent of the federal student loan portfolio.
Are there any other benefits for student loan borrowers in the bill?
- The bill also enables employers to contribute up to $5,250—tax free—to employees’ student loans for one year. All of that money will be able to help you pay down your student loan debt. SoFi has been advocating for Congress to pass this provision for some time and are excited it will be available for this year. We are also eager to see it become a permanent benefit available to you for years to come.
What about private student loans?
While federal loans are essentially paused, now is a great time to take a look at your private student loans, which often carry much higher interest rates. Market interest rates are relatively low right now so you may be able to save substantially by refinancing.
WDA Advantage Partner Program has partnered with SoFi to offer our members a preferential .25% rate discount when applying through SoFi.com/WDA. Find out what rates you qualify for in 1 minute at SoFi.com/WDA or reach out to [email protected] for more information.
Disclaimer:
Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)
