Advice for student loan borrowers in the age of coronavirus

Paying off law school loans can be a challenge even in good times.  

When a pandemic strikes? 

Well, we are in uncharted terrority.

However, Ashley Norwood, Accredited Financial Counselor (AFC) Regional Manager for AccessLex Center for Education and Financial Capability, is an expert in such matters.

Below is her commentary in wake of the passage of the stimulus bill: 

For student loan borrowers struggling in the short-term due to the pandemic, the stimulus bill provides much needed reprieve from required monthly payments on top of the previously announced benefit of zero percent interest for the next few months. This can help alleviate financial stress in households by opening up room in household budgets for other immediate concerns. Borrowers will not have to request this payment reprieve. It will be applied automatically.

 And the news gets even better for those on income-driven repayment (IDR) plans and those pursuing Public Service Loan Forgiveness (PSLF). Though no payments are being made, each month will still count as an eligible IDR and PSLF payment. This means that borrowers won’t just experience short-term relief but then be made to pay longer. Their payment term will remain unchanged – as long as they make their payments after payment resumes.

For those who can and want to make their loan payments during this time, payments can still be made. And their payments will be supercharged while no interest is accruing. For those on repayment plans that cover all accruing interest normally, the full payment will go toward paying down principal only – paying down their balance faster. For those on IDR plans that don’t cover all accruing interest monthly, payments will be applied to the outstanding interest first.

Whether you’re feeling a financial pinch right now or not, it would be prudent to reassess your overall financial strategy during the pandemic. If you don’t have a fully funded emergency fund, debt acceleration might need to take a backseat for a few months. With many Americans being eligible for direct stimulus funding, it may be best to hold on to any extra cash flow in the event that it’s needed in the coming months.

 

 

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