The Coronavirus Aid, Relief and Economic Security (cares) Act


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The spread of Covid-19 is causing chaos in the whole world by breaking the financial systems and causing economic vulnerability. One area which is having a positive development is the federal system on the student loans. In addition to empowering the public safety and health precautions, students who borrowed loans for education purposes are ensured to not face the negative impact of the Covid-19 outbreak. The loan services jointly with the policymakers of the federal government are implementing widespread debt cancellation to help students with lower income.

The CARES Act is a bill signed into law by the president on March 27, 2020 to support the economic downturn. This act will impact positively on approximately 9 million student loan borrowers. The main provisions under this include, suspension of payments for the six months, reduced interest rates, updated accounts to help easy repayment and withheld loan collection and other. 

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The federal law passed in this emergency compromises up to 90% by providing benefits such as lower interest, freezed monthly payments and other. The latest updates you need to know are detailed below. Six month suspension on making monthly payments: You make regular monthly payments after the grace period to clear off the loan. But due to the emergency situation, the monthly payments to be made are suspended till September 30th, 2020. You can get this option with the federal loan on current and not applicable on the private loans you have. You could get other attractive options to repay private loans from your loan servicer.

Reduction of student loan interest: The law also states that the interest rates on federal student loans are reduced to about 0% during the span of six months. Which means the interest will not accrue during this period. Hence, you make payments directly on the principal amount. It is different with the private loans, where the lenders have offered a modified program upon the request of the borrower. Loan servicers such as Navinet have a term of three months of suspension of loan payments. The interest rates could also be reduced to 0.25% when you enroll to make automatic payments.

COVID-19 Emergency Forbearance: The act also specifies on the temporary forbearance program for ones who cannot make payments due to the financial crisis. In this the payments are suspended and during this period there is no capitalized interest accrued. Thus, you do not have to worry about the interest that could pile after the duration of six months. This is automatically updated in your loan accounts to avoid harm on your credit report. For private loan holders, you are required to pay the interests during this period rather than making the whole monthly payments. Repaying Federal Student Loans amid the covid-19 Outbreak

The federal student loans holder can repay their loans effectively with a series of modified repayment options available. Consolidating student loans: Consolidating your federal loans is one easy option where you can combine all the loans into one loan to get a newer interest rate, extended period and one monthly payment to make. For instance, if you are a graduate who is looking for a job or finding it difficult to make monthly payments. Then you could consolidate all your loans to get a longer period with lesser payments to be made monthly.

Public Service Loan Forgiveness (PSLF): Working for a loan forgiveness program is not affected under the economic condition. If you are a medical student who is working at a government sector or a non-profit organization to serve people, your service will be taken into consideration. This will count towards the 120 qualifying monthly payments you make.

Choosing the Income-Driven Repayment plan: The income-driven repayment plan you choose will give you an option of paying 10 % of the total income you gain every month toward clearing the loan. The default period offered is 110 years and it could be extended up to 20- 25 years defending your financial situation. As your income increases, your monthly payments gradually increase. This helps people with lower income to manage their finance and monthly expenditure. Paused Student Loan Collection: Now you’re clear that the loan payments are freezed for a period of 6 month due to the Covid-19 outbreak, the interest rates are reduced to the lowest and the credits are not harmed for delaying loan payments.

There is a common question arising, i.e: ‘Can I continue making payments?’. The answer is, Yes, you could make monthly payments to clear your federal loan sooner. You can make regular payments if you can afford and it largely helps in eliminating the interest that could pile up. Using the situation right to clear the principal amount could ease the repayment phase for the loan run. People with private student loans might take time to figure out the right repayment option that could be helpful as none of the federal programs are applicable for the private loans.. Here are few detailed,

Refinancing student loans: Refinancing student loans is a best option for people who could afford to make large payments and for the ones who are willing to clear the loans faster. You could combine all the loans into a new loan at a lower interest rate at your loan servicer to ease the repayment. His help is getting one loan to make payment on time and also a lower interest if you have loans with higher interest rates previously. This plan is based primarily on your credit scores, credit history and income to get a lower fixed interest.

Enroll to autopay: some loan servicers offer a reduction in the interest of up to 0.25% as you enroll to the autoplay option. Under this the loans are paid automatically when the amount is deducted from your bank account by accessing it. You could use this period to make an automatic period with an added advantage of not worrying about the due dates.

The laws and regulations are mainly implemented to protect the population with lower income and avoid the worsening of the current situation. By taking necessary precautions to overcome the financial strain people can try coming out of the economic pressure. Using the current situation and the repayments options available as an advantage to improve your financial situations is necessary. You could also read to understand the financial information regarding student loans and how the government is working to improve the negative impacts of Covid-19.   

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