27 Mar What happens to college debt under the stimulus package?

This question was submitted before the coronavirus crisis escalated.

Q. Although I am grateful for financial aid that helped me graduate from college, I am a 62-year-old retiree with a $200,000 school debt. I have signed up for the pay-as-you-earn plan, but I continue to struggle paying the $235 a month on my student loan. Is there anything else I can do to reduce the debt?
— Stymied in N.J.

A. We’re sorry to hear you’re struggling to make these payments.

Typically, using a “Pay as You Earn” student loan repayment program is an effective way to lower your monthly payments.

Before we get to your options, let’s review what changes are here because of the coronavirus stimulus bill.

Student loan borrowers would be allowed to delay making payments on federal student loan payments without penalty until Sept. 30. This extends the previous plan, which allowed students to defer their payments without interest for at least 60 days. To get this deferral, you had to contact your loan servicer, but the new bill automatically suspends these payments without interest for six months.

Collection on student loans, including taking a borrower’s tax refund will also be stopped temporarily.

In earlier versions of the bill, Democrats were asking for the cancellation of at least $10,000 in student debt for all Americans. That part of the bill did not remain, but some believe it could be part of a future relief bill.

So the first thing you should do is contact your lender to see if any of these provisions affect your loans.

But for the long term, you need to manage these loans.

One possibility is to refinance your student debt at a lower rate of interest, said Kenneth Van Leeuwen, a certified financial planner with Van Leeuwen & Company in Princeton.

“You can also consider refinancing to a longer-term loan which would effectually lower your monthly payments but would extend the payments over a longer period of time,” he said.

But because you are already utilizing a pay as you earn strategy, it is likely that you are making the lowest possible payments, Van Leeuwen said.

Plus, if you currently have a federal student loan, refinancing into a private loan would also eliminate the possibility for potential loan forgiveness from the federal government, he said.

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This story was originally published March 27, 2020.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.