Would you like financial relief for your private student loan?
Here’s what you need to know.
The CARES Act — Congress’ new $2 trillion stimulus package — has numerous benefits for your state student loans, including Suspension of federal student loan payments, 0% interestand no wage garnishment or tax refund. What about private student loans? While the benefits of the CARES Act do not apply to private student loans, there are still several options for your private student loans.
Pause your payments
You may not know this, but most do private lenders for student loans allows you to pause your payments due to coronavirus. Now, many of these lenders also suspended their monthly payments before the coronavirus, but it’s worth understanding how that works. First, it is different than federal student loans. Under the CARES Act there is 0% interest on our federal student loans (no personal student loans) through September 30, 2020. For personal student loans, depending on your lender, you may be able to pause personal student loan payments, but interest will accrue on your student loan balance. Some lenders allow you to pause your personal student loans for three to 12 months (and possibly longer).
How to contact your student loan administrator to pause payments
1. Contact your student loan administrator and explain your financial situation. If you’ve lost your job or been furloughed, be honest with your student loan officer. If you know when you can start making payments again, even better.
2. Ask about flexible student loan repayment options. Many lenders and student loan service providers offer flexible student loan repayment options. Some are offered online, while others may require you to speak to a customer service representative. Some examples include: pausing payments, lowering your interest rate temporarily, or switching to an interest-only amortization schedule.
3. Understand the financial terms. If you agree to sign up for a new student loan repayment plan, make sure you understand the financial terms, interest rate, and fees, if any, even if it’s a temporary one. Understand how interest is calculated and whether it is capitalized.
Refinance your student loans
Another option is to refinance your student loan and save money. Now is a wise time to refinance your personal student loans. Interest rates have dropped significantly and are incredibly cheap. When you refinance student loans, you get a new student loan with a lower interest rate, which can help you save money, pay off student loans faster, and get out of debt faster. There are no fees for refinancing student loans, and you can refinance as many times as you like (even if you’ve refinanced before). As long as you can get a lower interest rate compared to your current interest rate, it can be a smart financial move.
Here’s a quick example. Let’s say you refinance $60,000 in student loans at an 8% interest rate, and you can refinance at a 3% interest rate and the same 10-year repayment period. You would lower your monthly payment by $124 and save a total of $14,860.
Helpful Resources: What You Can Do With Your Student Loans
More options for your student loans
What else can you do to pay off your student loans faster and save money during this challenging time? Here are four options, all of which are toll-free: