Have Questions About Your Student Loans? We Have Answers!

Have Questions About Your Student Loans? We Have Answers!

By: AJ Watts, Member Development Officer

Understanding the complexities around student loans is difficult in normal times. This year, things are even more complicated due to the confusion and uncertainties caused by COVID-19. To that end, and in the spirit of Affinity’s ongoing mission to provide financial advice to members, here’s my list of importance questions – and answers – people often have about student loans.

girl with books

Question #1: Does federal student loan relief apply to me?
Back in March, Congress suspended mandatory payments1 on federal student loans. Originally meant to expire at the end of September, the suspension was extended until the end of the year. So it’s not until February 20212 that you’d need to make monthly payments on most federal student loans (though this isn’t necessarily the best opportunity to take, which we’ll get to in a moment). Additionally, these loans will no longer accrue interest during this time. But this doesn’t automatically mean you don’t have to make any student loan payments. Federal relief does not include options to temporarily suspend payments for borrowers with private student loans, such as from banks or private lenders, borrowers owing money on Perkins Loans, and commercially held FFELP (Federal Family Education Loan Program) loans. If you’re not sure whether you need to be making payments or not, you should contact your student loan servicer and ask.

Question #2: How can I make best use of the grace period for most federal student loans?
Though the suspension of student loan payments and interest accrual is meant to help people during this time, you shouldn’t necessarily see stopping payments as a first resort. If you can afford to keep making payments as usual, you should try to do so. If you graduated after the grace period began, you should use this time to find out what your minimum monthly payment would be, so that you can begin making it early if possible or at least so you’ll know how much it will be in January.

Question #3: How can I get help paying off my student loans?
The current grace period on payments and interest accrual only applies to some federal loans. Therefore, you may still have private loans requiring monthly payments. And once that grace period expires in January, you could have additional federal loan payments on top of those. Given the current state of the economy, this adds up to the potential for financial difficulties, especially for recent graduates who haven’t yet secured employment. If you’re having difficulty making payments or think you may in the future, there are options. You can look into consolidating your various student loans, aiming to reduce your monthly payment total or interest rate, or refinancing them with the same goal. Affinity offers competitive options and rates on both consolidation and refinancing, which you can learn more about here.

Additionally, there are many different options for certain federal student loans regarding income-based repayment (“IBR”). Typically, these plans cap your monthly payments at between 10 and 20 percent of your discretionary income, depending on the specific plan. You can learn more about IBR plans (and apply for them) here3. If you still feel that you will have trouble repaying your loans, consider working with a non-profit credit counseling agency to develop a strategy for managing your debt. If you’re an Affinity member, we offer free credit counseling through Navicore Solutions.

Question #4: How can I avoid falling for student loan relief scams?
Uncertainty around COVID-19 has led to a marked increase4 in online fraud, and that could include student loan scams. With so many people unsure of the evolving rules and worried about their inability to make payments, the environment is ripe for such scams, but there are tell-tale signs when an offer is fraudulent. Firstly, if anyone promises quick debt forgiveness, they’re trying to scam you. It just doesn’t work that way. Secondly, if they ask for a fee up front, it’s a scam; no government or reputable private loan provider would do so. Thirdly, beware any use of aggressive sales tactics to get you to agree to do anything with your loans.

You should also be wary of trusting any offer that comes under an official government seal, as scammers can replicate these, and don’t share your FSA ID with anyone unless you’re absolutely sure it’s the government or your private loan provider you’re dealing with.

These are difficult times for many people and having a lot of student debt can seem overwhelming. But following these tips and knowing where to reach out for questions or help can guide you through the process and ensure you get on the path to making regular, sustainable payments on your student loans.

This information is for informational purposes only and is intended to provide general guidance and does not constitute legal, tax, or financial advice. Each person’s circumstances are different and may not apply to the specific information provided. You should seek the advice of a financial professional, tax consultant, and/or legal counsel to discuss your specific needs before making any financial or other commitments regarding the matters related to your condition are made.  

1 Retrieved from https://studentaid.gov/announcements-events/coronavirus

2 Retrieved from https://www.cnbc.com/select/student-loan-forbearance-extended-through-january-2021/

3 Retrieved from https://studentaid.gov/manage-loans/repayment/plans/income-driven

4 Retrieved from https://www.nytimes.com/2020/05/13/technology/personaltech/pandemic-scams.html