Unfortunately, the federal government’s student loan interest waiver and six-month payment suspension announced in late March doesn’t help 100% of federal loan borrowers.
In fact, about 6 million Federal Family Education Loan (FFEL) borrowers and a sizable fraction of the 2 million people with Perkins loans won’t qualify because of their loan type. And of course, private student loan borrowers aren’t eligible either.
It’s entirely possible that you have some loans that qualify for the coronavirus economic stimulus package and some that don’t — which makes it even more important to confirm your eligibility and understand how to seek relief for your ineligible debt. Specifically, let’s examine two questions:
- Are you sure your loans aren’t eligible for relief?
- How do you handle repayment on loans ineligible for relief?
Thanks to the coronavirus economic rescue bill, your loan servicer will automatically reduce your interest rate to zero and cancel all payments due through Sept. 30 if you have an eligible federal student loan.
Eligible loans include all federally-held Direct loans, including Grad and Parent PLUS loans, as well as most FFELs (which haven’t been granted since 2010). That leaves the following loan types uncovered:
- FFELs guaranteed by the federal government but held by a private entity
- Perkins loans originated by your school
- Private loans granted by banks, credit unions, state-run education authorities and online companies
Undoubtedly, the differences between a federal loan being “held” or merely “guaranteed” is bound to confuse. If you’re not sure what kind of loans you have, start by logging into the Federal Student Aid (FSA) website with your FSA ID to view all your federal loans.
A FFEL loan borrowed before 2010 is unlikely to meet criteria for relief. For any Perkins loans, you could clear up the confusion by calling your loan servicer directly or contacting your school’s financial aid office.
Finally, if you have education debt that doesn’t appear on the FSA website (and therefore isn’t owned or guaranteed by the Department of Education), call your lenders for those missing loans to confirm that your debt to them is categorized as private loans. You can also review your credit report to find the names of these lenders or loan servicers — the information is available for free via AnnualCreditReport.com.
If you have commercial or school-granted loans, you might think you’re out of luck. But there are a variety of ways to still pause or reduce your repayment, receive repayment assistance and generally manage your debt until the economy recovers:
- Contact your lender or loan servicer immediately
- Consider a Direct Consolidation loan for your ineligible federal loans
- Look into refinancing at least your ineligible private loans
- Talk to your employer about pitching in toward payments
- Stay tuned to Student Loan Hero
It’s imperative to speak directly with your lender or loan servicer — not a third party, as that could leave you vulnerable to coronavirus student loan scams.
Of course, your repayment options will depend on your loan type.
For federal student loans ineligible for relief…
You could pause your monthly payments with a deferment or forbearance (unrelated to COVID-19):
- A general forbearance that’s awarded at your servicer’s discretion, based on your financial constraints
- An unemployment deferment if you’ve lost your job
Alternatively, you could lower the monthly payments on your ineligible FFEL debt by enrolling in the Income-Sensitive Repayment plan to cap your dues at a percentage of your annual income. If you recently suffered a loss of income, you could apply for a recalculated (decreased) payment obligation.
Be aware, however, that interest will continue to accrue and capitalize during a forbearance, unless you have subsidized loans. And interest will also build up if you join an Income-Sensitive Repayment plan that lengthens your loan term.
For private student loans…
There are fewer (and usually less generous) options for private loans, but they do exist. These include:
- Economic hardship or disaster-related forbearance: A pause in repayment that’s awarded on a case-by-case basis and doled out in one- to three-month spans.
- Temporary payment reduction: Less common than forbearance, these payment reductions (like those offered by Discover) would lower your monthly dues for a brief period.
- Temporary interest rate reduction: Navient, which services government-held federal loans eligible for the 0% interest rate but also provides ineligible federal and private loans, encourages borrowers affected by COVID-19 to apply for a lower rate.
That said, the options available have expanded as lenders seek to work with their customers during the coronavirus pandemic. You can check out what some of the biggest student loan companies are offering by consulting our list of forbearance options from private student loan companies during the COVID-19 outbreak.
Before agreeing to any changes to your loan agreement, ensure you understand the implications. Interrogate your lender or loan servicer with questions to make sure you understand how interest will pile up during a forbearance, for example. You might also ask about the length of time that a payment reduction could add to your overall repayment term. Then return to Student Loan Hero and use our loan repayment calculators to assess the consequences.
You might have already discovered one workaround for your ineligible FFEL or Perkins loans: grouping them into a Direct Consolidation loan. Besides getting you covered for a portion of the 0% interest and payment-suspension period, consolidation would also deliver a single monthly payment and make you eligible for income-driven repayment (IDR) plans.
Consolidating with Uncle Sam might not be wise in certain cases, though. Here are three potential cons to be aware of:
- It would erase your progress toward the consecutive-payment criteria for a program like Public Service Loan Forgiveness.
- Outstanding interest on your loans will be capitalized (added to your principal loan balance) when you consolidate.
- You’ll likely miss at least the first two months of the government’s six-month payment suspension. While applying for a Direct Consolidation loan takes less than a half-hour, actually receiving it would take a minimum of 30 days, and likely longer.
If you’re on the fence about consolidation, speak with your loan servicer. You can also review our guide about deciding whether consolidation is right for you.
Like consolidation, refinancing would group your student debt into one new loan. But while it still won’t grant you access to the government’s interest-rate freeze and payment suspension, refinancing could reward you with a lower interest rate or a monthly payment (or both) more suited to your ability to repay.
These potential benefits generally make refinancing a great option for your private student loans — all the more so as refinancing companies are now offering relatively low rates after the COVID-19 outbreak prompted emergency rate cuts from the Federal Reserve. If you have strong credit (or have a cosigner who does), you could refinance your existing private debt with a new lender, perhaps one that also offers some coronavirus pandemic refinancing relief.
However, know that there are pros and cons to refinancing, so don’t rush into refinancing (and privatizing) FFEL and Perkins loans that aren’t currently eligible for the federal relief package. The biggest consideration is that once your refinance, any federal loans will lose their government protections, such as IDR and expanded deferment and forbearance options. You also wouldn’t be eligible for any future government relief, unless it applies to private education debt.
If you have federal or private loans that don’t qualify for the student loan interest waiver and payment suspension, now’s the time to bring up your student debt concerns with your human resources department.
As part of the coronavirus economic rescue package, the government gave employers temporary tax relief for contributing up to $5,250 toward their employees’ student loan payments. This benefit is slated to stay until at least Jan. 1, 2021, and it could cover any student debt, whether federal or private.
It’s worth noting that many major companies provide student debt relief already.
Sure, your commercially-held federal loans and private loans are mostly unaccounted for in the government’s new relief package, but they could be affected by future legislation.
As recently as March 19, for example, Congressional Democrats were pushing for $10,000 or more in forgiveness for federal loan borrowers. It’s not clear whether such a plan will come to pass, but the magnitude of it makes it worth keeping an eye on.
We’ll keep you posted on developments via our Student Loan Hero news reports and our Coronavirus Information Center. The FSA website’s updates sometimes lag behind other news sources, but it’s worth bookmarking as well.
Interested in refinancing student loans?Here are the top 6 lenders of 2020!
|Lender||Variable APR||Eligible Degrees|
|1.99% – 6.65%1||Undergrad & Graduate|
|1.99% – 7.10%2||Undergrad & Graduate|
|2.99% – 6.44%3||Undergrad & Graduate|
|2.39% – 6.01%||Undergrad |
|1.99% – 6.43%4||Undergrad & Graduate|
|3.19% – 6.08%5||Undergrad & Graduate|
|Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Laurel Road.
Laurel Road Disclosures
Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. Mortgage lending is not offered in Puerto Rico. All loans are provided by KeyBank National Association.
ANNUAL PERCENTAGE RATE (“APR”)
There are no origination fees or prepayment penalties associated with the loan. Lender may assess a late fee if any part of a payment is not received within 15 days of the payment due date. Any late fee assessed shall not exceed 5% of the late payment or $28, whichever is less. A borrower may be charged $20 for any payment (including a check or an electronic payment) that is returned unpaid due to non-sufficient funds (NSF) or a closed account.
For bachelor’s degrees and higher, up to 100% of outstanding private and federal student loans (minimum $5,000) are eligible for refinancing. If you are refinancing greater than $300,000 in student loan debt, Lender may refinance the loans into 2 or more new loans.
ELIGIBILITY & ELIGIBLE LOANS
Borrower, and Co-signer if applicable, must be a U.S. Citizen or Permanent Resident with a valid I-551 card (which must show a minimum of 10 years between “Resident Since” date and “Card Expires” date or has no expiration date); state that they are of at least borrowing age in the state of residence at the time of application; and meet Lender underwriting criteria (including, for example, employment, debt-to-income, disposable income, and credit history requirements).
Graduates may refinance any unsubsidized or subsidized Federal or private student loan that was used exclusively for qualified higher education expenses (as defined in 26 USC Section 221) at an accredited U.S. undergraduate or graduate school. Any federal loans refinanced with Lender are private loans and do not have the same repayment options that federal loan program offers such as Income Based Repayment or Income Contingent Repayment.
All loans must be in grace or repayment status and cannot be in default. Borrower must have graduated or be enrolled in good standing in the final term preceding graduation from an accredited Title IV U.S. school and must be employed, or have an eligible offer of employment. Parents looking to refinance loans taken out on behalf of a child should refer to https://www.laurelroad.com/refinance-student-loans/refinance-parent-plus-loans/ for applicable terms and conditions.
For Associates Degrees: Only associates degrees earned in one of the following are eligible for refinancing: Cardiovascular Technologist (CVT); Dental Hygiene; Diagnostic Medical Sonography; EMT/Paramedics; Nuclear Technician; Nursing; Occupational Therapy Assistant; Pharmacy Technician; Physical Therapy Assistant; Radiation Therapy; Radiologic/MRI Technologist; Respiratory Therapy; or Surgical Technologist. To refinance an Associates degree, a borrower must also either be currently enrolled and in the final term of an associate degree program at a Title IV eligible school with an offer of employment in the same field in which they will receive an eligible associate degree OR have graduated from a school that is Title IV eligible with an eligible associate and have been employed, for a minimum of 12 months, in the same field of study of the associate degree earned.
The interest rate you are offered will depend on your credit profile, income, and total debt payments as well as your choice of fixed or variable and choice of term. For applicants who are currently medical or dental residents, your rate offer may also vary depending on whether you have secured employment for after residency.
The repayment of any refinanced student loan will commence (1) immediately after disbursement by us, or (2) after any grace or in-school deferment period, existing prior to refinancing and/or consolidation with us, has expired.
POSTPONING OR REDUCING PAYMENTS
After loan disbursement, if a borrower documents a qualifying economic hardship, we may agree in our discretion to allow for full or partial forbearance of payments for one or more 3-month time periods (not to exceed 12 months in the aggregate during the term of your loan), provided that we receive acceptable documentation (including updating documentation) of the nature and expected duration of the borrower’s economic hardship.
We may agree under certain circumstances to allow a borrower to make $100/month payments for a period of time immediately after loan disbursement if the borrower is employed full-time as an intern, resident, or similar postgraduate trainee at the time of loan disbursement. These payments may not be enough to cover all of the interest that accrues on the loan. Unpaid accrued interest will be added to your loan and monthly payments of principal and interest will begin when the post-graduate training program ends.
We may agree under certain circumstances to allow postponement (deferral) of monthly payments of principal and interest for a period of time immediately following loan disbursement (not to exceed 6 months after the borrower’s graduation with an eligible degree), if the borrower is an eligible student in the borrower’s final term at the time of loan disbursement or graduated less than 6 months before loan disbursement, and has accepted an offer of (or has already begun) full-time employment.
If Lender agrees (in its sole discretion) to postpone or reduce any monthly payment(s) for a period of time, interest on the loan will continue to accrue for each day principal is owed. Although the borrower might not be required to make payments during such a period, the borrower may continue to make payments during such a period. Making payments, or paying some of the interest, will reduce the total amount that will be required to be paid over the life of the loan. Interest not paid during any period when Lender has agreed to postpone or reduce any monthly payment will be added to the principal balance through capitalization (compounding) at the end of such a period, one month before the borrower is required to resume making regular monthly payments.
KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
This information is current as of June 23, 2020 and is subject to change.
2 Important Disclosures for Splash Financial.
Splash Financial Disclosures
Splash Financial loans are available through arrangements with lending partners. Your loan application will be submitted to the lending partner and be evaluated at their sole discretion. For loans where a credit union is the lender, or a purchaser of the loan, in order to refinance your loans, you will need to become a credit union member.
The Splash Student Loan Refinance Program is not offered or endorsed by any college or university. Neither Splash Financial nor the lending partner are affiliated with or endorse any college or university listed on this website.
You should review the benefits of your federal student loan; it may offer specific benefits that a private refinance/consolidation loan may not offer. If you work in the public sector, are in the military or taking advantage of a federal department of relief program, such as income based repayment or public service forgiveness, you may not want to refinance, as these benefits do not transfer to private refinance/consolidation loans.
Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of May 1, 2020.
Fixed APR: Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed Rate options range from 2.88% (without autopay) to 7.27% (without autopay) and will vary based on application terms, level of degree and presence of a co-signer. Rates are subject to change without notice. Fixed rate options without an autopay discount consist of a range from 2.88% per year to 6.21% per year for a 5-year term, 3.40% per year to 6.25% per year for a 7-year term, 3.45% to 5.08% for a 8-year term, 3.89% per year to 6.65% per year for a 10-year term, 4.18% per year to 5.11% per year for a 12-year term, 4.20% per year to 7.05% per year for a 15-year term, or 4.51% per year to 7.27% per year for a 20-year term, with no origination fees. The fixed interest rate will apply until the loan is paid in full (whether before or after default, and whether before or after the scheduled maturity date of the loan).
Variable APR: Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Variable rate options range from 1.99% (with autopay) to 7.10% (without autopay) and will vary based on application terms, level of degree and presence of a co-signer. Our lowest rate option is shown with a 0.25% autopay discount. Our highest rate option does not include an autopay discount. The variable rates are based on the Variable rate index, is based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of April 27, 2020, the one-month LIBOR rate is 0.43763%. The interest rate on a variable rate loan is comprised of an index and margin added together. The margin is a fixed amount (disclosed at the time of your loan application) added each month to the index to determine the next month’s variable rate. Variable rate options without an autopay discount consist of a range from 2.01% per year to 6.30% per year for a 5-year term, 4.00% per year to 6.35% per year for a 7-year term, 2.09% per year to 3.92% per year for a 8-year term, 4.25% per year to 6.40% per year for a 10-year term, 2.67% per year to 4.56% per year for a 12-year term, 3.44% per year to 6.65% per year for a 15-year term, 4.75% per year to 6.93% per year for a 20-year term, or 5.14% per year to 7.10% for a 25-year term, with no origination fees. APR is subject to increase after consummation. Variable interest rates will fluctuate over the term of the borrower’s loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a co-signer. The maximum variable rate may be between 9.00% and 16.00%, depending on loan term. The floor rate may be between 0.54% and 4.21%, depending on loan term. These rates are subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
3 Important Disclosures for SoFi.
4 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.19% APR (with Auto Pay) to 6.43% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 6.43% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of June 15, 2020, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 6/15/2020. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at [email protected], or call 888-601-2801 for more information on our student loan refinance product.
© 2020 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.2% effective May 10, 2020.