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Interest cancellation and deferred payments: what you need to know about student loans during a coronavirus outbreak

If you are worried about your studies or paying off a loan, publication Federal Student Aid Gathered all the information to help you understand what to do in case of emergency due to coronavirus.

Photo: Shutterstock

You can temporarily stop making payments

To assist borrowers during a state of emergency with COVID-19, you can temporarily stop making a monthly loan payment.

Student Information

What if the campus is closed due to coronavirus? Is it possible to finish the semester and maintain federal aid to students?

Please contact the university. Many schools take measures (such as homework or online classes) so students can complete the semester.

If the campus is closed or will offer only online instructions, will I get paid for the hours when I can’t work at my federal work-study?

If you cannot work on schedule due to coronavirus-related disruptions (such as university closure or student quarantine), your university may pay you for any scheduled hours or allow you to work in a different way, for example, by completing work online, depending on type of work.

My mother cannot go to work because of the coronavirus, and she is not paid if she does not work. This means that my financial need has increased. Can I get more financial help?

Talk to the university’s financial aid office. They have options for students so they can continue their studies.

Someone in my family has a coronavirus, so the whole family is quarantined, and I can’t attend classes. How can I study so as not to miss classes and not to lose financial assistance?

Contact the university’s financial assistance office, as well as your academic adviser / trainer or program coordinator, for further guidance on financial assistance situations. In addition, if you need to take a vacation as a result of an outbreak of coronavirus, you should speak with the university's financial assistance department.

Many universities provide detailed coronavirus solutions and recommendations for students. Check your school’s website and social media accounts for resources and the latest information about this situation.

If my school goes online, will I receive less financial assistance?

If your school has translated classes into an online format, you must continue to participate in term paper and follow the instructions of your teacher or professor in order to be eligible for financial assistance.

How do I contact the school’s financial assistance office if it’s closed?

Check your school’s website for contact information. Verified social network accounts, they can be a good source of the latest information on how to contact educational institutions. While many universities have converted face-to-face courses to online learning, most of them remain open and accessible.

Information for borrowers

On March 13, 2020, US President Donald Trump announced the abolition of interest on all federal loans for education. What loans are included in the ad?

All loans held by the US Department of Education (ED) will terminate interest accruals. This includes direct loans, as well as loans from the Perkins Federal Program and the Federal Family Education Loan (FFEL) owned by ED.

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Please note that some FFEL loans are owned by commercial lenders, and some Perkins loans are held by an educational institution. These loans are not eligible for this benefit.

The Department of Education announced that all borrowers with federal loans will be automatically set interest rates at 0% for at least 60 days starting March 13. Also, borrowers with federal loans have the ability to completely suspend payments for at least two months without interest, writes CNBC.

While interest rates are reduced automatically, borrowers must request a suspension of payment, called a deferment, from their lenders online or by phone. This can help free up cash for other accounts or financial liabilities during the coronavirus crisis.

“This is something I highly recommend doing for people who have recently lost their jobs or reduced their working hours due to a national emergency,” said Michael Bloch, CEO and founder of Pillar, a personal finance app.

As a rule, suspension of payments in the long term costs the borrower more, since interest is still accrued and added to the main balance of the loan. But if borrowers contact their lenders now, they will receive a delay of several months without an increase in interest.

However, if you can make your payments, you should still, Bloch says.

"All federal student loans are temporarily charged at 0%," he says. "This means that the borrower's payments will go further towards paying the principal and getting out of debt more quickly."

How can I use this program if I have a Federal Education Loan Program (FFEL) and non-ED federal Perkins loans?

You can combine your FFEL program or non-ED Federal Perkins loans into a direct consolidation loan that will be eligible for benefits. However, if you consolidate them even after the cancellation of interest accrual, the interest rate may be higher than the one you are currently paying, and any outstanding interest will be added to your main balance.

Who can tell me if the interest rate on my loans will be reduced?

Contact your borrower online or by phone to determine if your loans are eligible. If you don’t know who your borrower is or how to contact him, visit StudentAid.gov/login or call 1-800-4-FED-AID (1-800-433-3243; TTY for the deaf or hearing impaired 1-800-730-8913) for assistance.

If my loans are ED owned, do I need to do something to cancel the interest on my loans?

No, ED will automatically set up your account so that interest is not charged. The account adjustment took effect March 13, 2020. During this interest-free period, if you continue to make payments, the full amount will be credited to the principal. However, if interest has already been calculated on your loan before President Trump announces the benefits, your payments will first be used to pay off this outstanding debt.

Will my monthly payment be reduced due to interest cancellation?

Not. Your monthly payment will remain the same, but the full payment amount will be applied to the accrued interest or the outstanding principal amount. This means that you will repay your loan faster during this period with zero interest.

If I make loan payments after March 13, how will they be applied?

During the interest-free period, the full amount of your payments will be applied to the principal amount after all interest has been paid. You can suspend your payments for at least 60 days without charging additional interest.

How long will the interest be canceled?

Interest on student loans held by the federal government is not charged for at least 60 days starting March 13, 2020. ED may extend this period depending on the emergency status in the country associated with COVID-19.

On March 20, the president said that I could suspend payments on my loans. What do I need to do to pause my payments?

You can ask for a respite. Being in deferral means that you can temporarily stop paying federal student loans without entering into arrears. Since interest is canceled during a state of emergency with COVID-19, interest will not accumulate. If you request a deferral, you will not have any payments for the duration of its validity. Your credit service will cancel any scheduled automatic payments. After deferment, you will have to resume payments. If you want to use auto-debit, you can restart automatic payments.

What if I have already past due for more than 31 days?

If you delayed your payments for at least 31 days as of March 13, 2020, you will automatically be deferred to give you insurance during COVID-19.

If I want a grace period, should I request it or will I receive it automatically?

If you want to receive a respite, you must request it by contacting your borrower. If you don’t know who your lender is or how to contact him, visit StudentAid.gov/login or call 1-800-4-FED-AID (1-800-433-3243; TTY for the deaf or hearing impaired 1-800-730-8913) for assistance.

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Are private student loans eligible for this benefit?

Not. ED does not have legal authority over private student loans, so they are not subject to the president’s application.

How long will the grace period last?

The deferral will last at least 60 days from March 13, 2020. ED may extend this period depending on the emergency status in the country associated with COVID-19. If the extension option is extended, your loan agent will inform you of the extension.

Is there a reason why I can not suspend my payments?

If you want to write off debt under the Public Service Loan Forgiveness Program (PSLF). She forgives the remaining amount of your direct loans after you have completed 120 (10 years) qualifying monthly payments in accordance with the repayment plan, working full time. In this case, you may not want to be deferred, because the time spent in deferment does not count towards the required payments. However, if your income has changed, you can claim a lower monthly payment. If you participate in an IDR plan and your income has changed significantly, you can update your information and receive a new payment amount. To do this, go to the page StudentAid.gov/idr, click "Apply now", and then launch the application by clicking the button "Recount my monthly payment".

If you can afford to make loan payments during a state of emergency with COVID-19, you can continue to do so to pay off as much of your loan as possible at an interest rate of 0%.

How do I know when interest will begin to accumulate again?

Lenders will also contact you to inform you that you will need to start making payments again.

What should I do if my loan is already deferred?

If your loan is already in deferment, it will stop calculating interest from March 13, 2020, at least for 60 days. However, when this period passes, any interest accrued during the deferral period until March 13, 2020 will be capitalized, which means that any outstanding interest will be added to your main balance sheet.

What if I want to continue making payments?

If you want to continue to pay your loans based on your current monthly payment, you can do this. You do not need to contact anyone if you want to continue to make payments. This can help you quickly pay off the balance of the loan, since the entire amount of your monthly payments will be applied to the principal amount as soon as all interest has been paid.

If you are having difficulty with money, please contact your borrower as soon as possible to discuss options to reduce or temporarily suspend your payments.

What if I want to make a partial payment?

While you are under benefits, you will not be penalized for making a payment that is less than your regular monthly payment. Meanwhile, you still have the opportunity to make a loan payment in order to make progress in reducing the balance.

My company closed due to COVID-19. I don’t make money and I can’t pay my student loan bill. Can I stop making payments until I work again?

If you have any problems making payments, contact your borrower as soon as possible. If you have a federal Perkins loan, go there. You can easily avoid the consequences of delay or default by staying in touch with your lender.

He can provide information on deferral options that will allow you to temporarily stop making payments on loans. You can also switch to a different repayment plan, which will provide you with a lower monthly payment.

I currently have an income-based payment plan. I earn a lot less money due to the outbreak of coronavirus and I don’t know when my income will return to the same level. What can I do?

If you have significantly changed your income, you can at any time ask to recount your monthly payment. Your borrower can provide more information.

I make payments and hope to receive a civil servants loan forgiveness (PSLF), but right now I can’t work because of the coronavirus. If I miss a payment, can I still qualify for the PSLF?

If you do not pay within a month or enter a deferment because you cannot afford the payment, this month does not count towards the PSLF. However, the corresponding payments do not have to be sequential, so you will not lose the payments already made. If you think your work will be affected over a long period of time, you can re-certify your repayment plan ahead of schedule to take into account the drop in income.

Of course, the PSLF also requires that you work full time for the appropriate employer in order to get a loan for the PSLF. If your employer does not believe that you work full time during this period, then this month or these months will not be counted in the PSLF, even if you make a payment. However, paid sick leave or other vacation time may be counted by your employer as hours worked for PSLF. To learn more about PSLF, visit StudentAid.gov/publicservice. To learn more about income-based payments, visit StudentAid.gov/idr.

On March 25, 2020, ED announced that it would not withhold my federal tax refund to pay off my federal student loan debt. My refund has already been taken. Can i get it back?

A federal tax refund will be refunded to you if your refund was in the process of withholding on or after March 13, 2020. A federal tax refund will not be refunded to you if the withholding process was completed before March 13, 2020.

If you have questions about whether a federal tax refund has been delayed, call the ED Team at 1-800-621-3115 (TTY for the deaf or hard of hearing 1-877-825-9923).

On March 25, 2020, ED announced that part of my social security benefits, including disability benefits, would not be deducted to pay off my default student loan debt. My payment has already been accepted. Can i get it back?

A portion of the Social Security payment you received will be refunded to you if your payment was on hold on or after March 13, 2020. A portion of your Social Security payment withheld will not be refunded to you if the withholding process was completed before March 13, 2020.

If you have questions about whether your social security payment was withheld, call the ED Problem Solving Group at 1-800-621-3115 (TTY for the deaf or hard of hearing 1-877-825-9923).

On March 25, 2020, the ED announced that private collection agencies had stopped making collection calls and sending letters or writing bills. What should I do if I want to continue the payment process that I started before the ED announcement?

You can continue the payment arrangement related to the non-payment of a federal student loan. Private collection agencies have been instructed not to call you, but they can help you if you contact them during this period. For assistance with continuing your current payment agreement, call the ED group at 1-800-621-3115 (TTY for the deaf or hard of hearing 1-877-825-9923).

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On March 25, 2020, the ED announced that private collection agencies had stopped making collection calls and sending letters or writing bills. What should I do if I want to consolidate my default federal student loans or start the loan rehabilitation process now?

To consolidate or start a loan rehabilitation process related to your default federal student loans, call the ED Default Resolution Group at 1-800-621-3115 (TTY for the deaf or hard of hearing 1-877-825-9923) for assistance.

Is deferral of e applicable to paying rehabilitation loans?

The deferral announced on March 20, 2020 does not apply to outstanding loans under the rehabilitation program. However, ED stopped collecting payments on past due loans for at least 60 days starting March 13.

After you have successfully completed the restoration of your loan, you can put your loans under administrative control, if such an opportunity still exists. Recall that the ED announced that a deferral option will be available for at least 60 days starting March 13.

Will interest be accrued on my outstanding loan?

Interest-bearing loans held by ED are not charged interest for at least 60 days starting March 13th. This includes direct loans, as well as Perkins and FFEL loans owned by ED.

What happens after a 60-day termination period?

ED actively monitors COVID-19 national emergency and can extend the 60-day period. After a 60-day period, your lender will provide you with information on the resumption of your payments. A message can be sent by email or posted to your account.

Sites for more information.

Here are some sites you might find helpful:

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