PORTLAND, Maine — Before the public health crisis that has come from the new coronavirus, there was another crisis: student loan debt. It has amassed to a new record of nearly $1.6 trillion.
Thanks to the Coronavirus Aid, Relief, and Economic Security (CARES) Act that passed in late March, there is some relief for the 44 million borrowers. Here’s a breakdown of the help that’s available and what borrowers should avoid.
For most federal student loan borrowers, the CARES Act offers relief by suspending monthly payments and eliminating interest through September 30, 2020. The keyword here though is most.
“Only about 75% of federal student loans are eligible for the CARES Act waivers,” Betsy Mayotte, the president of the Institute of Student Loan Advisors, said.
Federal student loans borrowed from before 2010 may not be eligible for the CARES Act waiver because that's when the federal government became the lender. For older loans, the lender was a private lender. It was a public-private partnership where a private lender would be part of a federal program and they would have what's called a loan guarantee. A lot of those older loans do have forbearance.
So what can you do if your federal loan isn’t eligible?
"The name of the game is paying the least amount over time,” Mayotte said.
One, you can call your lender and ask for forbearance. It will put the loans on hold however interest will still accrue.
“I say it’s not necessarily the best option,” Mayotte said.
Two, there are deferments for unemployment or economic hardship.
“Both of those will also put payments on hold and if you have subsidized loans no interest with accrue which is why it’s a little better than a forbearance.”
Or three, consider a lower payment option.
“If it’s between putting food on your table or paying your rent then obviously even though the interest will still accrue it’s best to put your loans on hold because you certainly don’t want to default,” Mayotte said.
Now, what about private loans? The Finance Authority of Maine advises borrowers to contact their private loan servicer if they are having trouble making payments due to COVID-19.
"Depending on the private loan program the first thing you want to find out is, is there a special program related directly to COVID? There might be something because there are so many people being impacted by this," explained Martha Johnston, FAME's Director of Education.
"They may have made a special program where they automatically give you forbearance for 30 days and all you just have to ask over the phone. Now it might be that you need longer than 30 days and maybe for a subsequent request you might have to document loss of income so you can ask those questions in advance."
If you have a loan administered by the Finance Authority of Maine, contact FAME's Education Team at 1-800-228-3734 and select the first option.
Martha Johnston says for those considering going to college or back to school should be thinking right now about filing a Free Application for Federal Student Aid or FAFSA by May 1st, the deadline for the Maine State Grant. That way, when life returns to normal, you'll be ready and know what funding is available to you.
No matter which type of student loan you have, everyone needs to watch out for scammers who offer to help you with your student loans for a fee.
“There’s no reason to pay for help with your student loans," said Mayotte. "If someone is telling you they can help get you the waiver for a fee it’s absolutely a scam and you should report them to the Federal Trade Commission.”
Do you have more questions about your student loans? You may find the answers at a new website designed to help families navigate this time financially.
At NEWS CENTER Maine, we’re focusing our news coverage on the facts and not the fear around the illness. To see our full coverage, visit our coronavirus section, here: /coronavirus
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