BRYAN, Texas — The CARES Act put a pause federal student loans earlier this year for those that qualified. However, this student loan forbearance is scheduled to end at the end of January 2021.
With the economic crisis that followed the pandemic, the CARES Act aimed at relieving some of it by administering a forbearance with 0% interest.
"Automatically the loans were placed in the situation, that means during in this period, clients are not required to make these payments, and importantly, there was also prohibition saying there was 0% interest including the forbearance. That is important because with other forbearances, you continue accruing interest, that is not the case in this specific administered forbearance resulted from the CARES Act," said Texas A&M Mays Business School Professor Paolina Medina.
Medina encourages every individual to look carefully at their own financial situation and figure out what payment plan works best for them now.
“It’s important to keep up with a portfolio view of your finance. And if you don’t pay your loans today, you’re going to have to pay it later on. In that sense, it’s important to know that how much debt one can have depends on your personal circumstances. For someone that thinks that they may struggle that they may struggle making the loan payments later down the road, then it’s important to not drop the ball and maybe even continue making payments,” said Medina.
For some people, this forbearance period has been a breath of relief from the ongoing pandemic and their own financial struggles.
“Having student loans through the university was definitely tough, coming out of college and having an entry level job. And not being able to necessarily keep up with interest levels and the extra fees that are tacked on, so having kind of that break in the pandemic where you could catch up and make payments without being charged extra has really been helpful," said Texas Tech Alumni Jack Ciampi.
Jack said this current freeze of student loans has encouraged him to pay them off sooner.
“I would say it’s definitely motivated me to get it paid off quicker because now I know that being a recent grad and seeing that interest before the pandemic, it makes me not want to have that again. So I’m very motivated to try and get it paid off quickly to try and save money in the long term,” said Ciampi.
He hopes for this administered forbearance to continue for a while so that he and others with student loans can pay them off without additional interest.
This forbearance is scheduled to end on January 1st, 2021. With a lot of uncertainties, Professor Medina encourages you to look at your finances and plan for the long run now.