The following is a transcript of our video, CAP on the Stimulus Package and Student Loans: Conversations Advisors Should Be Having With Their Clients, which is located on our new YouTube Channel, College Aid Pro™. Please consider subscribing so you can stay up on the latest information being shared there.
Hey everybody, Matt Carpenter, College Aid Pro™, and College Aid Professionals, I hope you’re hanging in there, just as well as you possibly can be, given what we’re all living through here. I want to spend a few minutes talking about how the stimulus package is impacting student loans and parent loans.
There’s a few critical things, because in most cases, if not all cases, we have to take some ownership in order to take advantage of the benefits that were being offered. Okay, now, first off, this stimulus package only applies to federal government student loans. So this is not applying to the private sector, which I’ll touch on in a few minutes. For anybody that has a government, a direct government student loan, okay, that could be undergraduate, graduate, or a parent using a PLUS loan.
We have the ability to suspend payments for six months, okay? No interest is going to accrue during that six months either. And, if we’re going into loan forgiveness – given this program for six months, the deferred payments will go towards our forgiveness plan.
So it’s a very, very generous offer that, for those of us that need some additional financial help right now, should absolutely take advantage of this. In order to do so, we have to contact our service provider, okay, so it’s not the federal government directly, we have to contact our service provider in order to pause these student loan payments. We have to anticipate that when it goes back into repayment, which is after September 30, we’re going to have to make sure that we re-enroll in that program.
Hopefully, an auto debit program to make sure that we’re not going to have late payments moving forward. So again, this is not going to happen automatically. We need to take ownership of this, advisors make sure that you’re coaching your families on that front. If families are listening you have to do that on your own. Listen, if you have the ability to make payments, now’s a great time to eat away the principal because the the interest will be paused even if you’re making payments. So if you can do so great, if you’re like a lot of families where every dollar helps, take advantage of this program.
If we have a private student loan, the Sallie Mae, citizen banks, any number of potential different private student loans. This is not automatically the case. Now, a lot of these lenders are going to have some type of flexibility that hasn’t normally been offered.
They’re not going to be proactive in most cases. You, as the borrower, need to seek out your particular lender and see what options, if any, you have the ability to take advantage of. Here’s something else I want everybody to be thinking about right now as well, now’s a great time where we’re going to hit the pause button on the federal government student loans.
If we do have private loans, rates for refinancing loans are historically low, so now might be a good time to also say, “Hey, as we’re doing this evaluation in our overall kind of financial makeup, could we save ourselves some monthly cash flow by refinancing and locking in a great rate. This is something that we might want to take a look at. Again, we’re big fans of Credible because it allows us to do the side by side comparison and see if that is a viable option. It’s not always the case, probably worth doing our homework. Again, if we’re a borrower, and we have a federal government student loans, we want to take advantage of this great program. You should do so but you have to take the onus of that and do it on your own.
We’ll keep you updated as as information comes in on a weekly basis, and in the meantime, everybody hang in there, stay positive and we will come out of this.