The ongoing coronavirus crisis leaves many who face job cuts and layoffs wondering how they’re going to pay the bills.
Day by day, we’re hearing about more strategies that can help over time.
President Donald Trump announced Friday that those who have federal student loans can suspend payments for at least the next 60 days. Interest would not keep building during this time, so it would be better than requesting a forbearance where interest will build. Borrowers should contact their lenders for more details.
Federal lenders will automatically reduce all borrowers’ interest rates to 0% “until further notice.”
And it’s possible more relief could be in sight, as we go through the economic upheaval associated with fighting COVID-19.
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What’s going to happen with my student loan?
Mark Kantrowitz, publisher and vice president of research for Savingforcollege.com, said student borrowers with federal student loans could see a suspension of loan payments with no interest accruing for up to six months, under the Republican stimulus bill introduced Friday. The suspension of payments would last three months at first and then an additional three months could be added at the discretion of the Department of Education.
The goal here is to avoid delinquency or default by staying in touch with your servicer. Failing to repay a student loan can have serious financial consequences for borrowers, including collection fees, wage garnishment and money being withheld from income tax refunds, Social Security, and other federal payments.
Sarah Sattelmeyer, project director of The Pew Charitable Trusts’ project on student borrower success, noted that challenges that borrowers face when trying to contact services will only be exacerbated during the crisis.
Consumer watchdogs are raising concern that servicers may be strapped, as well, as they attempt to manage a large volume of calls during the crisis.
What if I can’t pay my mortgage or home equity line?
Homeowners who face financial stress during the crisis need to reach out for relief too.
If you’re under financial stress, contact your mortgage lender to see if you can qualify to make reduced payments or be granted a complete pause in payments.
In some cases, mortgage payments can be suspended or reduced for up to 12 months for borrowers who were affected by the coronavirus crisis. Homeowners in such forbearance plans will not incur late fees.
And afterward, a servicer would be required to work with the homeowner on a permanent payment plan to help maintain or reduce monthly payment amounts as necessary, including a loan modification, according to Fannie Mae’s outline of the assistance options.
Keith Gumbinger, a mortgage expert and vice president at HSH.com, a mortgage information website, noted that some lenders including Bank of America are already putting such programs in place.
“If you are or think that you will be experiencing difficulty in making mortgage payments due to the coronavirus, you should be proactive in contacting your mortgage servicer to get any relief process started as soon as possible,” Gumbinger said.
“Don’t wait until you start missing payments. Lenders are likely to become very busy in the weeks and months ahead with requests for help.”
Bank of America said it will work on a case-by-case basis with borrowers hit by economic disruptions associated with the coronavirus crisis.
If you’ve got a car loan, a mortgage, a credit card or a home equity loan through Bank of America, the bank is willing to talk with borrowers who request a way to defer payments.
Customers who defer payments on mortgages, for example, will end up with payments added to the end of the loan.
“In all of these instances, there will be no negative credit bureau reporting for up-to-date clients,” the Bank of America notes.
The bank isn’t forgiving the loan but it is extending it out to help you stretch a limited amount of cash.
Bank of America said it has paused foreclosure sales, evictions and repossessions.
Consumers also can request refunds involving overdraft fees, non-sufficient funds fees, and monthly maintenance fees. And credit card customers can seek refunds on late fees.
Bank of America customers who face financial hardships related to coronavirus are encouraged to visit the company’s Client Resources website and contact the client services team for assistance.
The key to the bulk of these programs is you’re going to have to reach out to your lender if you’re facing a layoff or reduction in pay as a result of the COVID-19 outbreak. And if we know anything about any of previous emergency programs, don’t expect this to be a stress-free process all the time.
Follow Detroit Free Press personal finance columnist Susan Tompor on Twitter@tompor.