In March of 2020, the Department of Education placed all federal student loans owned by the DOE into administrative forbearance. Payments federal loans are paused through October and no interest is charged. Borrowers and advisors should take note of the following:
PSLF Participants Making Payments During Suspension Period
Borrowers who continue to make payments during the suspension period should be aware that their loans will be marked as "paid ahead" status. The paid ahead status could prevent payments made after September from counting toward PSLF.
The CARES Act was structured to allow PSLF borrowers to receive credit for the number of payments made toward the PSLF 120 requirement during the suspension provided they contine to work full time in the public sector.
Borrowers should notify their servicer that payments made during CARES Act suspension period should be applied to their loans now vs. future payments due.
NSLDS Data no longer provides loan interest
The NSLDS data reported to borrowers and used in some loan repayment software no longer shows the interest rate data. Any analysis of student loan debt based on this information will be incorrect because of the lack of interest rate data
A case in point is the loan simulator found on studentaid.gov. Every student graduating this summer is required to complete exit counseling using the Department of Education's loan simulator. However, with interest rates set to 0%, the simulator assumes no interest will ever be charged.
Approximately 4 million graduating students will be using flawed assumptions to make repayment decisions that could cost them 10s even 100s of thousands of dollars.
To the untrained, unprepared eye, many financial advisors and borrowers may not notice these discrepancies.
It is imperative that student loan borrowers making repayment decisions seek qualified advice from professionals who understand the latest nuances of student loan debt management.
Borrowers can find an advisor by searching the CSLP database.