LoanBuddy posted in Blog @ March 18, 2020

COVID-19 Update

Amid the uncertainty surrounding the COVID-19 pandemic, knowing how to plan for the future is incredibly challenging. Since maintaining your own health and your family’s has been the priority, everything else took a backseat, substantial discussions regarding the financial impact of COVID-19 have now emerged.

Information is up to date as of March 18th 2020.

An increasing number of communities have moved to a fifteen day “shelter in place” that coincide with national guidelines to slow the spread of COVID-19. While health continues to be the main concern, so are paychecks and upcoming bills, including student loan payments. Clarity is still yet to be provided on the impact of the pandemic on federal student loan repayment. If a client’s life is being disrupted, naturally their student loan payments come after the necessities.

Last week, the President hinted at financial support for workers through a payroll tax holiday; shortly after, the White House announced it would also waive interest on all undergraduate and graduate federally-held student loans, setting the interest rate to zero “until further notice”. This move is intended to benefit the 42 million Americans holding $1.5 trillion in student loan debt.

Inside Higher Ed published some insights recently.

Existing Options for Federal Student Loan Borrowers

While working with your clients, you can continue to encourage them to contact their federal servicer if they are having trouble making their payments. Borrowers are able to switch repayment plans to find a more affordable repayment option, or even use deferments or a forbearance to temporarily postpone their payments. 

What about clients working towards Public Service Loan Forgiveness (PSLF)? We recommend you encourage them to continue making on-time voluntary monthly payments to ensure they are working towards their 120 qualified payments for PSLF. And if they can’t afford the payment? Contact their servicer for options. 

Future Impact: Unfolding Daily

Many experts have noted that waiving the interest may not be enough to offset the economic impact for the majority of Americans. It is important to recognize there has been no discussion concerning payment relief for private student loans, totaling roughly $125 billion of the $1.5 trillion

Another proposed scenario includes cash payments directly sent to citizens for any disruption caused to their incomes by COVID-19 and sheltering in place precautionary measures. 

The government is considering additional steps to help ease the financial burden of what is to come. However, it is not known what those details are yet. Will student loan payments be halted? At this point, the jury is still out, and it remains to be seen what will transpire for a solution. 

What’s the Bottom Line for Your Clients?

Experts from the Consumer Financial Protection Bureau (CFPB) noted that during the great recession, even with short-term options such as waived interest, deferments, and forbearances, families experienced unprecedented defaults in many financial sectors, thereby negatively impacting their financial futures.

Once the White House’s plans are flushed out, it will be of the utmost importance to continue to support clients’ goals and to develop budgets that will help them stay on track toward financial success, while leveraging the relief made available to them.

Most K-12, colleges and universities have closed for the rest of this school year, extended spring break, or moved online. Businesses are laying off workers and temporarily closing to the public as well. These abrupt changes are impacting the economic landscape and your clients’ financial health. Leveraging the upcoming government initiatives means staying informed. We are here to help. 

LoanBuddy is Taking Action

LoanBuddy is providing ongoing updates to our technology that reflect these new policy changes, with enhancements already under development. We are by your side and our fintech tools help establish the optimal student loan repayment for your clients. You can be sure that you will be able to show clients up-to-date clear paths to financial wellness in these unprecedented times. 

The LoanBuddy for Advisors Federal Calculator has been updated to reflect the current reduction of interest on federal student loans to 0%. A new toggle and dropdown add additional capability for 0% interest with an end date (per year) to accommodate any scenario planning during this unknown timeline for your clients student loan debt. 

Our LoanBuddy Facebook group provides additional insights delivered by financial professionals who are working overtime to deliver these necessary services to their clients. Please do join and engage in the discussions for a collaborative and impactful approach to finding answers you may have at this time. 

We hope that you, your families, and colleagues stay healthy and safe during these  trying times. Here at LoanBuddy, we are doing our part to safeguard the vulnerable members of society by working remotely and taking the necessary steps to protect our collective well being. 

Amid the uncertainty surrounding the COVID-19 pandemic, knowing how to plan for the future is incredibly challenging. Since maintaining your own health and your family’s has been the priority, everything else took a backseat, substantial discussions regarding the financial impact of COVID-19 have now emerged.

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