Student debt problems shock some borrowers who bet on COVID-19 relief
When you know a little more about something, you can walk around in a fog that wreaks havoc on your finances.
And so begins the story of coronavirus relief efforts and student loan debt.
Increasingly, consumer advocates are reporting hearing from student loan borrowers who haven’t paid a dime on their college loans since March and think they’re in great shape. They’ve heard of all the student loan disruptions that are now going through the end December.
What about the money travel thread?
Nestled in their basket of debt, they face a big mess of student loans that are not covered by coronavirus debt relief.
According to Sue Stoddard, housing counselor and family self-sufficiency resource coordinator for the Wayne Metropolitan Community Action Agency, a Detroit subway consumer was shocked after late payments related to unpaid student debt suddenly surfaced in 2020 on his credit report.
Stoddard, a financial coach for the borrower, had to explain that more than $ 13,000 in student loan debt was now declared past due, indicating that these specific loans were not covered by special forbearance programs.
The borrower had had to make monthly payments on these loans, but had stopped due to some misconceptions about what was and what was not covered by COVID-19 debt relief.
The borrower did not realize that the 0% temporary rates and automatic pausing of payments only applied to specific federal student loans, not all student loans.
About 9 million borrowers – those with private student loans and those with most Perkins loans and federal non-federally owned family education loans – do not receive automatic relief, according to the Student Borrower Protection Center, a nonprofit advocacy group.
“With private student loans, a borrower must ask for abstention. It is not automatic. Even the 90-day special forbearance from COVID-19 must be requested, ”said Mark Kantrowitz, editor and vice president of research for Savingforcollege.com.
And many experts recommend that you contact your loan officer if you are having difficulty making your payments or if you are unsure whether your loans are covered by federal coronavirus aid, relief and economic security law. or by other programs.
Incidents can trigger problems down the road – and technicians will try to get their money’s worth. For example, a private student loan creditor is entitled to 100% of your state tax refund, with court approval.
For private student loans, tax refund garnishment is only available at the state level and does not apply to federal tax refunds.
“While they can’t enter your federal repayment, they can take steps to collect faster than federal student loan officers,” Stoddard said.
“Federal agents are not able to take collection action until a loan is 270 days past due. Private agents can take action as soon as you are late once.”
According to student loan experts, the private agent can go to court and sue to garnish wages, seize money in your bank account and get your tax refund back.
“Lawsuits are the primary tool for collecting delinquent private student loans,” Stoddard said.
If you have past due federal student loans, your federal income tax refund may be offset to cover the debt. (For more information on offsets, you can call the US Treasury Compensation Program call center at 800-304-3107.)
Having past due student debt or past due debt will damage your credit score and raise the interest rates you would pay if you took out a car loan or mortgage.
Federal collections on delinquent federal student loans were also suspended until the end of the year. Remember, however, that these loans are deferred and are not canceled. People need to make a plan to start paying off their debt in 2021.
And why does your student loan need to be repaid?
If you’re confused, well, that’s part of the daily awakening in 2020, right?
“We found that many borrowers did not understand which loans qualified and which did not,” said Will Sealy, co-founder and CEO of Summer, which helps student loan borrowers track their loans and identify the best repayment options.
Sealy noted that some departments voluntarily granted borrowers with FFEL loans held in the trade 90-day forbearance when interest was still accruing. While useful, the break often left borrowers confused as 0% interest relief was available on other federal student loans covered by the CARES Act.
Some borrowers choose to consolidate certain former FFELs not covered in order to obtain relief under the COVID-19 forbearance policy. But this is not wise for everyone because some protections are lost while consolidating.
Any borrower who is unable to make repayments on federal commercial loans may consider enrolling their loan in an income-based repayment plan. If they are currently making less than $ 20,000 , the borrower will likely be eligible for a monthly payment of $ 0, ”Sealy said.
Summer has a online tool that all borrowers can access to determine which federal loans qualify under the CARES Act and which do not. See www.meetsummer.org/covidrelief.
Wayne Metro offers a monthly student loan webinar that is free to attend. For more information, visit www.waynemetro.org.
What Should Student Borrowers Do?
The first step in spotting problems is simply to request a free copy of your credit report go to www.annualcreditreport.com to see if any student loans are overdue. Free online weekly reports are offered until April 2021.
You might see these unpaid loans appear as overdue, overdue, or they might be listed in collections. Review credit reports for Experian, Equifax, and TransUnion.
You wouldn’t see late payments for federal student debt covered by COVID-19 relief. The status of the Federal Student Loan Account would appear as Current or Paid as Agreed.
“If you fail to pay your private student loans for 120 days and are not subject to authorized forbearance, your loans will be in default,” Kantrowitz said.
For the record, Kantrowitz said, he heard of a few private student loan lenders who could automatically put borrowers who haven’t made payments since March into a forbearance program, rather than seeing their student loans. private in default.
You’re at the mercy of your lender here, but it’s wise to reach out now, even if you’re late because you didn’t understand the rules.
Unfortunately, borrowers cannot tap into a central database to locate private student loan debt. But we can go to studentaid.gov to access information on federal loans.
Kantrowitz suggests that borrowers contact the financial aid office of the college they attended, as the school may have information on their private student loans.
Often, students sign the documents they have in front of them when they take out college loans and they don’t realize that not all student loans are the same. Such distinctions, however, are essential to understand in 2020 where nothing is so simple.
Contact Susan tompo vthat is to say [email protected]epress.com. Follow her on Twitter @trickster. To subscribe, go to freep.com/specialoffers. Rfind out more about business and subscribe to our company newsletter.