Relief for Student Loan Borrowers

It’s time to talk about student loans to keep our clients up-to-date regarding relief for financial burdens exacerbated by the pandemic. Over 43 million people have student loan debt, which represents debt felt by all of their immediate family members, making student loan debt a subject that affects at least 160 million people’s finances.

We recently posted the New York Times article to our Facebook page, Does Personal Finance Still Work in Our Changing Economy? It stresses the need to pay attention to our country’s currently rising debt burden. It points out concerning student loan debt that there are opportunities for some relief.

CARES Act Provisions

The CARES Act and subsequent legislation have attempted to relieve student loan debtors by freeing up their money to pay for daily expenses after potentially suffering reduced hours or benefits, loss of business opportunities, or unemployment. Some of the current measures include:

• Deferred Payments for All – All Federal student loans owned by the Education Department were awarded an administrative forbearance for loan repayment during the pandemic, without accruing interest. It was recently extended until May 1, 2022. Types of loans included:
  
  • Direct Loans – Most student loans are direct and eligible. 
    

  • FFEL Program Loans – Some FFEL program loans might also be owned by private financial institutions. Check with your provider to make sure you are included.

  • Federal Perkins Loans – These loans are usually owned by the school or institution you borrowed money to attend. Call your financial aid office to confirm your status.

  • Default Loans Are Deferred – Even if you haven’t been current with your payments, your interest and fees will not be charged during the forbearance. If you’re over 270 days past due or in default, collection attempts and wage and social security garnishments will pause until after the extension expires. It’s advised to start saving up to start payments when the time comes.  

• Disability Loan Discharge – Provision for 41,000 qualifying borrowers with total and permanent disabilities to not have payments reinstated. 

• Student Loan Forgiveness – If you qualify, you may hire a 3rd party to keep track of yearly forgiveness certification over the next ten or twenty years. In the meantime, you’ll pay a small monthly fee to the certification company. Credit ratings will also improve since this program’s deferment counts as on-time payments.

• Repayments based on income – At the end of the deferment, if you cannot afford current monthly minimums, you may appeal for a reduction by extending the length of your loan repayment period. You can later opt to pay more each month again. Be sure of the fine print in these agreements. For hardship cases, they may be willing to lower your interest.

• Deferment and forbearance – You could ask for an individual deferment extension after May 1.

• Employer Student Loan Repayment Plans – The CARES Act originally allowed employers to contribute $5,250 toward student loan repayment for employees through December 21, 2020. The Consolidated Appropriations Act, or CAA, signed by President Trump in December of 2021, extended this benefit through 2025. Advocates are looking to make this a permanent benefit. This contribution is tax-free for the original employee/borrower and has positive tax advantages for the company contributing. Contact your employer to see if they might participate in this assistance program.

Help with Student Loans or Other Debt

Myrick CPA clients with student loans have many options to alleviate stress and uncertainty regarding their remaining debt. To find out which options may work best for you, contact our office today.