Financial Planner on deferring Federal Student Loans
Federal student loans get more leeway, but it is not always good every time to take advantage of it. There is a huge concern among financial planners on deferring federal student loans. It is about how students are going to pay their education loans during the COVID-19 crisis. It has already forced millions of Americans out of their jobs. Thankfully, the CARES (Coronavirus Aid, Relief, and Economic Security) Act has come to their rescue. This readily available federal relief was recently signed into law.
CARES Act
The financial planners on deferring federal student loans, include a 2 trillion dollar aid package. It is a one-time 1,200 dollar stimulus payment for those incomes that fall below a certain threshold. It comes along with a 500 dollar payment per eligible child. However, there is another provision of this new legislation on financial planners on deferring federal students loan. It is intended to help those concerned about how they are going to continue repaying their education loans. Big thanks to the CARES Act, federal student loan borrowers are entitled to relief in the form of forbearance.
No Penalty
The aim of financial planners on deferring federal student loans is to help you in stopping payments on your education loan. Therefore, under the CARES Act, you can now do so without penalty until September 30. During this time, interest will not accrue on your debt, nor will non-payment get reported as negative activity on your credit record. In addition, this temporary pause on your payments will happen automatically. You don’t need to apply for forbearance and in addition there is no fee involved.
Not the Best Choice
That said, just because you have the option to pause your student loan temporarily doesn’t mean it’s the best choice for you. In fact, financial planners on deferring federal students loan do not stop you from making payments. You may continue to do so if you can afford it. If you have lost your income or seen it decline, not paying your student debt for a number of months will likely provide some welcome relief.
Non-accrued Interest
Right now, deferring federal student loans are not accruing interest. If you keep making payments, your money will be applied to your loan’s principal. This means your balance will go down more substantially with each payment you make. Normally, each monthly payment you make on deferring federal student loans is divided between principal and interest. However, with interest waived, you have an opportunity to shed your debt faster by knocking out more principal. This will in turn, will result in less interest over time.
Knock them out
Now, if you have retained your paycheck but left with no emergency savings, you should stick your spare cash in the bank. But if you are good on cash reserves, paying to defer federal student loans now gives you a chance to knock them out sooner. Moreover, you save money on interest in the long run. If you intend to keep paying your student loans while they are eligible for forbearance, you won’t be denied that option.
Lessen Interest Quotient
You can also put your deferring federal student loans into forbearance if your financial circumstances change between now and late September. Let us say, you have a job now, but you lose it a month or two down the line. Indeed, a financial planner on deferring federal student loans is a good thing. But if you are in a decent spot financially, you may be able to use that leeway as an opportunity to shed your debt more quickly. This enables you to pay less interest over the life of your federal student loan.
