Issue #40: Help me help you... with your student loans

The CARES Act put all payments on federally held student loans on hold through Sept. 30. Borrowers in this category automatically got placed into administrative forbearance dating back to March 13. They’re not required to pay, and their loans have a 0% interest rate. 

This potentially sets up a sweet deal if I can afford to make my regular payments on student loans. Assuming I don’t have unpaid interest from before the coronavirus outbreak, they’ll go directly toward the principal. Also, once interest starts accruing again, it’ll be based on a reduced sum.

“You’re going to save money on interest in the long run,” Mayotte says.

But if I’m in this group — the one where my loans do indeed qualify and I’m comfortable enough to consider making payments — Mayotte told me to look at my overall financial situation before making a decision. If I need every cent I can get for essentials or I’m worried about my job, it may be smart to take advantage of this student loan forbearance period. I could pay down higher-interest debt or redirect the cash elsewhere.

“We don’t know how long the economic effects of this pandemic are going to last — I certainly think beyond September,” Mayotte says. “I would recommend people kick up their emergency fund money to be as robust as possible.”

There’s also nothing preventing me from walking the line and doing both. I could skip monthly payments for now, and if I have a financially solid summer, I could just make a big payment right before the forbearance period ends on Sept. 30. It’d still go toward my principal and reduce the total that interest accrues upon.

Clearly, this is complicated AF. And it all comes with caveats. 

There are different circumstances around Public Service Loan Forgiveness, for instance. Plus, remember that not all student loans qualify for the CARES Act forbearance. If my loan is private or only federally guaranteed, the rules are different. 

The general takeaway is that if I need help or I’m confused, I have options. I can call my servicer or check out resources like studentaidpandemic.org to learn about lower payments, disaster forbearance and unemployment deferment.

(but please don't tell me you scrolled past all of my hard work)

If my loans qualify for the automatic six-month forbearance and I have a large emergency fund, it’s not a bad idea to tackle my principal. But that’s a big — and nuanced — “if.”

“The best high-level advice is to contact your loan holder if you’re struggling,” Mayotte says.

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check out this crazy celebrity purchase

via Getty

Nancy Pelosi, the speaker of the House, is stuck in her house due to the coronavirus outbreak. Luckily, she’s got a whole bunch of sweets there. While on The Late Late Show earlier this month, Pelosi turned the camera on her freezer, which appears to contain at least 12 pints of Jeni’s, two pints of Talenti and a box of Dove chocolate dessert bars. I did the math, and that’s more than $150 worth of ice cream. Politicos are using this to criticize her, but I honestly respect it. Ice/Cream 2020.

five things I'm loving online right now

send me cute pictures of your pets, please

CREDIT: PRACHI BHARDWAJ

This is Marlowe, a pup with gorgeous eyes who has temporarily relocated from New Jersey to Georgia during the coronavirus. Marlowe is thankful his student loan payments have been pawsed.

Well, I need to go order expensive ice cream for delivery.

See you next week.

Julia

P.S. I loved hearing about what you are doing with your stimulus payments! Scholar Gabriel has his earmarked for school fees. Scholar Michelle decided to take $500, buy small gift cards to grocery stores and donate them to a local domestic violence shelter. And as far as how I should spend mine, Scholar Cindy said that after building up my emergency fund, I should donate to a food bank or set aside cash to double tip the next time I get my hair/nails done. Finally, Scholar Karin recommended buying the three-piece Harry Potter set from Jim Kay for $90 as opposed to one $300 book. That's news I can use.

P.P.S. What’s the best part of being YOUR friend? What are you doing about your loans during this crisis? Do the Dolla Scholla holla by emailing julia.glum@money.com or tweeting @SuperJulia. I’m also accepting Beatles facts.