Take Advantage Of Student Loan Debt Relief Under CARES Act
May 2020 ISSUE April 14, 2020 Updated April 29, 2020Personal Finances Debt Management
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The COVID-19 pandemic is creating devastating economic effects, including soaring unemployment. As a result, many doctors’ personal and practice finances have been negatively impacted. But there’s some good news for those with outstanding student loans who may benefit from the recently enacted stimulus package that temporarily suspends student loan payments for the next six months.
The CARES Act, the largest economic stimulus bill ever enacted, was signed into law on March 27, 2020. The law allows most student loan borrowers to stop making monthly payments through September 30, with no financial penalties. Interest will be suspended, freezing each borrower’s balance, allowing each account to remain in good standing. Furthermore, any borrower who has defaulted on any federally held student loan will not have their tax refund withheld, wages garnished, or Social Security payments withheld. Collection calls will also be put on hold. This new law goes even further than President Trump’s earlier emergency declaration suspending federal student loan payments for 60 days interest-free without penalty.
This will bring relief to 43 million Americans who owe nearly $1.5 trillion in federal student loans. The typical family with student loan debt spends $179 a month on payments, but many doctors’ payments are well above this average due to their larger student loan balances. The suspension of these payments will free up an estimated $50 billion in much needed cash flow for families through September 30.
Only those student loans made directly by the federal government, as well as a portion of those made by private lenders and guaranteed by the government, will receive this relief. About 25% of borrowers won’t receive this aid since they took a loan out through their state, directly from their institution, or even a private bank.
Student loan lenders had until April 11, 2020 to inform borrowers as to whether their loans qualified for this relief. If you haven’t heard yet, check with your student loan lender today.
Updated April 29, 2020. Originally published April 14, 2020.
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