Student loan forbearance

[rigs32]

Got a letter from FedLoan that federal student loan payments are in administrative forbearance for six months. They also confirmed that anyone in Public Service Loan Forgiveness will still get credit for those six months as if payments had been made.

This will do so much more for me than the stimulus check I expect to get (but am not sure how much it will be for). My ten years are up in either Dec 2020 or Jan 2021, so I am excited to only have 3-4 payments left.

ETA: I am paying my loans under the PSLF plan which, as described below, would give me no benefit to continue paying at this time.

 

[Mackenzie Click-Mickelson]

I'm opting to continue payments, just made what would have been my April payment yesterday, though I kept myself enrolled in the event something comes up, as my servicer Navient advised there's no benefit to opting back into automatic payments.

Are you going to continue making payments? If you don't you will extend your loan repayment period by the amount of time the loans are in the administrative forbearance. They aren't forgiving the loans for those not enrolled in a loan forgiveness program just giving 0% interest for this time period and pausing the payments.

 

[cabanafrau]

My daughter had been pushing to pay her balance off early before all of this happened and is very happy to use any time given interest free to speed up her plan.

 

[kdonnel]

Loan forbearance does not usually mean interest free. Usually it means that interest continues to accrue but payments are postponed. The interest is capitalized and added to your balance.

Be sure to read any paper work to make sure you understand exactly what is being offered.

Many of the mortgage forbearance programs default to a ballon payment at the end of the postponement period. Other options are often available if you ask.

A deferment usually means no payments and no interest.

 

[Mackenzie Click-Mickelson]

Loan forbearance does not usually mean interest free. Usually it means that interest continues to accrue but payments are postponed. The interest is capitalized and added to your balance.

Be sure to read any paper work to make sure you understand exactly what is being offered.

Many of the mortgage forbearance programs default to a ballon payment at the end of the postponement period. Other options are often available if you ask.

A deferment usually means no payments and no interest.

In this case they really do mean no interest for the time period. You will still owe the principle balance regardless so not making any payments during the forbearance time period will lengthen the loan period.

Here's the info from my loan servicer:

"We've taken the following actions on the federally owned loans we service for you:

• 0% Interest Rate - We changed the interest rate on the loans to 0% for the period March 13, 2020, through Sept. 30, 2020. During this period, you will not be charged interest on your loans.

• Administrative Forbearance - We placed the loans identified in an administrative forbearance for the period March 13, 2020, through Sept. 30, 2020. During this period, you will not be required to make monthly payments on your loans. If your payments are made through auto debit, those debits will not occur while the forbearance is in place. We will report you as current to credit reporting agencies.

Although you will not be required to make monthly payments during this specific administrative forbearance period, payments you would have been required to make between March 13, 2020, and Sept. 30, 2020, will count toward loan forgiveness provided all other qualifying factors are met.

Note: If you choose to make payments during the administrative forbearance period, you may do so; however, you'll need to make those payments manually (not through auto debit). Given the 0% interest rate explained above, any payments you make during the March 13, 2020, through Sept. 30, 2020, period will be applied to paying down the principal amount of your loans after accrued interest from other periods has been resolved.

WHAT YOU NEED TO DO

Keep this notification for your records. We'll communicate with you in August to help prepare you for Sept. 30, 2020, when the 0% interest rate and administrative forbearance period ends.

There's no other action you need to take, unless you want to opt out of the administrative forbearance we've placed on your account. If you opt out, we'll remove the administrative forbearance and you'll be required to make monthly payments. Unless you want to continue making payments through auto debit, there is no advantage to you by opting out of the administrative forbearance. The 0% interest rate will remain in effect, and you will not be charged interest through Sept. 30, 2020, whether the forbearance remains in effect or not.

To opt out, let us know through one of the options described below in the section, "HOW TO CONTACT US."

• If you change your mind after opting out, you can simply request that your loans be placed in the administrative forbearance again. Contact us through one of the options described below in the section, "HOW TO CONTACT US."

• If you opt out and become more than 30 days late in making a required monthly payment, we'll place your loans in the administrative forbearance again."


-----------------------------------------------------------------
This aspect of the communication is key: "Given the 0% interest rate explained above, any payments you make during the March 13, 2020, through Sept. 30, 2020, period will be applied to paying down the principal amount of your loans after accrued interest from other periods has been resolved." When they say "other periods" they are meaning any interest outside of the March 13th-September 30th time period.

To make it a tad clearer here's the answer from the FAQs set up for the coronavirus and Federal Student Loans in general (so not specific to a particular servicer):

"UPDATED: What if I want to continue making payments?

If you wish to continue paying your loans during the administrative forbearance period, or to pay more or less than your regular payment amount, you are free to do so. Contact your loan servicer or visit your servicer’s website to make a payment or to find out how you can continue or start auto-debit payments. Continuing to make payments during the administrative forbearance could help you pay down your loan balance more quickly because the full amount of a payment will be applied to principal once all interest accrued prior to March 13, 2020, is paid.

The underlined is discussing the period being spoken about.

For example my payment that would have been drafted on April 13th was for a time period of 02/19/20 to 03/18/20. So for me my April 13th payment would have included accrued interest from 02/19/20 to 03/12/20. I made an additional payment like normal and that accrued interest is already taken care of now.

 

[cabanafrau]

Loan forbearance does not usually mean interest free. Usually it means that interest continues to accrue but payments are postponed. The interest is capitalized and added to your balance.

Be sure to read any paper work to make sure you understand exactly what is being offered.

Many of the mortgage forbearance programs default to a ballon payment at the end of the postponement period. Other options are often available if you ask.

A deferment usually means no payments and no interest.

The federal government has waived interest on student loans during this time. They are also allowing people not to make payments through the end of the year.

My daughter had been working to knock out her loans before all of this and had just paid off her biggest one earlier this year. She's fortunate enough to still be working through this and is still putting through payments. The fact that she's doing so and interest is not accruing is speeding up her repayment plan even more than she anticipated.

She hasn't said anything about her mortgage payments, but I can't imagine she's not making those as normal also.

 

[godisney14]

Loan forbearance does not usually mean interest free. Usually it means that interest continues to accrue but payments are postponed. The interest is capitalized and added to your balance.

Be sure to read any paper work to make sure you understand exactly what is being offered.

Many of the mortgage forbearance programs default to a ballon payment at the end of the postponement period. Other options are often available if you ask.

A deferment usually means no payments and no interest.

As Mackenzie wrote, the student loan forbearance stimulus is a little different from the usual mortgage forbearance. The student loan forbearance does not accrue interest.

And as the OP states, the real beneficiaries are the ones on the public service loan forgiveness program, which the loan payments are actually forgiven entirely from this stimulus. This is a great benefit to doctors who are working in certain non-profit community settings. Those medical school tuition are not a joke.

 

[kdonnel]

Just trying to help people understand that forebearance does not usually mean what it means in this case. The terms forebearance and deferment mean two very different things financially.

And just because the meaning has been altered in this special case does not mean the meaning change applies to all loan types.

Read any documents presented.

Edited to add:
The loans are being granted a forebearance and at the same time the interest rate is being set to 0%. So technically interest is accruing at 0%.

 

[godisney14]

Just trying to help people understand that forebearance does not usually mean what it means in this case. The terms forebearance and deferment mean two very different things financially.

And just because the meaning has been altered in this special case does not mean the meaning change applies to all loan types.

Read any documents presented.

I don’t think anyone is arguing with what you’re saying.
As you’re trying to educate others that a typical forbearance means interest is still accrued, we’re also just trying to inform others that this student loan program is different from the traditional sense in that the interest is also waived.

 

[rigs32]

Are you going to continue making payments?

I mentioned PSLF in my OP, but did not explicitly state that I am paying under that program. As a PP quoted, "lthough you will not be required to make monthly payments during this specific administrative forbearance period, payments you would have been required to make between March 13, 2020, and Sept. 30, 2020, will count toward loan forgiveness provided all other qualifying factors are met." Therefore, there is no benefit to me to continue making payments. They are essentially crediting those under PSLF with April through September.

 

[smiths02]

I mentioned PSLF in my OP, but did not explicitly state that I am paying under that program. As a PP quoted, "lthough you will not be required to make monthly payments during this specific administrative forbearance period, payments you would have been required to make between March 13, 2020, and Sept. 30, 2020, will count toward loan forgiveness provided all other qualifying factors are met." Therefore, there is no benefit to me to continue making payments. They are essentially crediting those under PSLF with April through September.

I heard worries by some colleagues that if you continue to pay that you could make a problem because there would be "double" payment or something like that. Seems easier not to pay.

I am not in PSLF, I still don't plan to make payments even though I am employed. I think it is better to save the money in a bigger rainy day fund until I am certain that I am going to be working after my contract is up in June. Also, I have a bigger loan with a lower interest that was consolidated and then I think 2 small ones and 2 medium ones on a generally higher interest rate. If I can save my loan payments, I can just pay off the smaller ones at the end of this versus making payments and having them apply evenly to all the loans.

 

[Mackenzie Click-Mickelson]

I heard worries by some colleagues that if you continue to pay that you could make a problem because there would be "double" payment or something like that. Seems easier not to pay.

I am not in PSLF, I still don't plan to make payments even though I am employed. I think it is better to save the money in a bigger rainy day fund until I am certain that I am going to be working after my contract is up in June. Also, I have a bigger loan with a lower interest that was consolidated and then I think 2 small ones and 2 medium ones on a generally higher interest rate. If I can save my loan payments, I can just pay off the smaller ones at the end of this versus making payments and having them apply evenly to all the loans.

At least with my loan servicer I had something like 4 or 5 options when I paid a payment outside of the normal schedule.

I paid the exact amount I normally would owe because personally that made it easier to me. The option I chose was to have that payment spread over the 5 loans I have that are Federal (spread over 4 years worth of college) which meant my payment was acting exactly as it normally would with this amount going towards that loan and that amount going towards another loan. I could however have opted to pay just one loan or a combination of loans.

You might check to see if that's an option if you wanted to

I mentioned PSLF in my OP, but did not explicitly state that I am paying under that program. As a PP quoted, "lthough you will not be required to make monthly payments during this specific administrative forbearance period, payments you would have been required to make between March 13, 2020, and Sept. 30, 2020, will count toward loan forgiveness provided all other qualifying factors are met." Therefore, there is no benefit to me to continue making payments. They are essentially crediting those under PSLF with April through September.

Right they are crediting those only in the Loan Forgiveness program.

If you're not in the loan forgiveness program they are not forgiving those loans thus there is a benefit to continuing payments, there isn't a benefit to opting out of the administrative forbearance (which would mean you would owe the payments as you normally would and if on autopay they would draft from your account) as that protects you should you be unable to or do not want to make payments throughout the period.

In terms of your credit score they are reporting everyone as current during the time period listed which protects those who do not make any payments during this time period.

**I am the PP you mentioned who put the information out there

 

[smiths02]

At least with my loan servicer I had something like 4 or 5 options when I paid a payment outside of the normal schedule.

I paid the exact amount I normally would owe because personally that made it easier to me. The option I chose was to have that payment spread over the 5 loans I have that are Federal (spread over 4 years worth of college) which meant my payment was acting exactly as it normally would with this amount going towards that loan and that amount going towards another loan. I could however have opted to pay just one loan or a combination of loans.

You might check to see if that's an option if you wanted to

I will definitely check that out for the future. If our jobs remain stable, I should finally be able to start attacking the student loan debt and it would make it so much better if I could pay more towards the higher interest rate but smaller amount loans.

 

[Mackenzie Click-Mickelson]

I will definitely check that out for the future. If our jobs remain stable, I should finally be able to start attacking the student loan debt and it would make it so much better if I could pay more towards the higher interest rate but smaller amount loans.

It's literally the same exact thought my sister-in-law had you're def. not alone in that

 

[rigs32]

**I am the PP you mentioned who put the information out there

Did I double quote you? My apologies. I realized after you responded that my OP wasn't clear. I work in government, so I'm so used to the vast majority of people in my circle being part of PSLF.

 

[Mackenzie Click-Mickelson]

Did I double quote you? My apologies. I realized after you responded that my OP wasn't clear. I work in government, so I'm so used to the vast majority of people in my circle being part of PSLF.

Oh no worries

I'm used to the opposite that no one I know is in loan forgiveness..we all have traditional annoying student loans that go away only if we die (well sorta)

I realized after I commented back to you that you edited your OP to clarify you're under the loan forgiveness program lol so we're both all good here

 

[gillep]

I am putting my normal payments into a savings account, just in case something happens and I need the cash during this period, and then if I don’t need the cash I will dump it all back towards my principle before the forbearance ends.

 

[pryncess527]

So on March 27th the announced no payments after March 13th would be drafted? No one told my bank on the 18th Which is fine, just amusing how this is allegedly applicable to auto-payments already taken out before it was enacted

We have a car loan we are trying to pay off asap, so if they actually stop our auto-draft for April (still shows as pending for the 18th on their site), we'll probably just throw it at the car.

 

[wvjules]

I have my loans through Navient and they are due on the 15th of the month. They took out last month's payment but there is a note on the website about the forbearance and no more payments or interest until 9/30.

 

[Mackenzie Click-Mickelson]

I have my loans through Navient and they are due on the 15th of the month. They took out last month's payment but there is a note on the website about the forbearance and no more payments or interest until 9/30.

Yes, they would have taken it out last month because it wasn't passed until 3/27. It was however made to be retroactive in its effective date to 3/13.