Almost everything has been affected by the Covid-19 outbreak and the education system is no exception. Students in universities and polytechnics all around the world who have been relying on loans for their education have an especially hard time, partially due to the uncertainty that has been brought on by this virus.
In the Straits Times article on 27 March 2020, all loan repayment and interest charges for graduates who had taken government loans for university / polytechnic will be suspended starting from June 2020 to May 2021.
This is to help graduates who are going to have difficulties in finding jobs during an expected economic downturn brough upon by the pandemic.
While each country’s education system copes with the Covid-19 pandemic and the student loan deferment differently there are some common characteristics all students should be aware of.
1. How long does the administrative forbearance last?
Many countries placed student loans in administrative forbearance. However, the duration of the forbearance period may vary from country to country.
In general, students have the opportunity to defer their loans from March all through September, but the exact date may vary in accordance with the country where you study.
In Singapore, students who have taking a government loan will be automatically given a suspension on loan repayments. For non-govenment loans, it works on an opt-in basis.
Also, you do not need to demonstrate that you have been personally affected by the novel coronavirus in order to make use of the deferment, but if before the forbearance period you had missed more than 3 months of payments you are not eligible for the deferment.
To find out more you should contact your loan provider.
2. Auto-debit payments.
If you have been using the auto-debit payments to pay off your student debt they will be suspended from March through September (in most countries).
You may request a refund for any payments that have been made during that period. You have to contact the organization that provides your loan to ask for more detailed information.
If you don’t want to take advantage of the administrative forbearance and want to continue paying off your loan then you may contact your servicer and opt out of the automatic deferment; in this case, the auto-debit payments of your loan will continue.
In addition, you can stay in the administrative forbearance and make the payments manually (i.e. without using the auto-debit). For more detail, you should contact your loan servicer.
3. How will you know when the deferment period ends?
In Singapore, the loan deferment is from June 2020 to May 2021.
For other countries, the students are due to return to the usual schedule of loan repayment at the end of September (this date may change in the nearest future, depending on how well the world manages to get a grip on the pandemic).
Your loan servicer should contact you in the month of August in order to inform you that it is time to resume the payments. Make sure that the contact information you provided to your servicer in your account is up to date because if it is not they will have trouble reaching you.
4. 0% interest rate.
In the USA for certain types of student loans the interest rate is 0% from March through September (but only for the ED loans). However, if some of the ED loans are owned by a commercial lender or by the institution the student attends then they may not be eligible for the deferment at the moment. If you study in an American university and want to find out more you can log into your StudentAid.gov account for more information.
In other territories, if you wish to know whether your loan interest has been reduced to 0% you should contact your loan servicer (either online or by phone).
If your loan is indeed eligible for the 0% interest rate and you choose to continue with the payments during the forbearance period then all the money will go towards paying back the principal amount (provided that all the interest accrued before March has been paid off).
5. Rehabilitating defaulted student loans.
If you are in an agreement to rehabilitate your defaulted student loans then the suspended payment may count towards your rehabilitation. Your loan tenure may be extended based on the number of months you have deferred, thus the monthly instalment will also be revised accordingly.
If the agreement has been finalized in the forbearance period (between March and September in many countries) this may affect the due date. You should contact your loan provider to find out more.
6. You can choose to continue with the payments.
The amount you pay back during the forbearance period will be applied to the principal loan amount. So, if you choose to continue with the payments in the forbearance period it may help you pay down your balance quicker.
You can make payments either by staying or opting out of the administrative forbearance. If you choose to stay and continue paying you will not be billed, and you may pay more or less than you do with your usual installments (until the end of the forbearance period). Also, you may not be able to make the auto-debit payments.
If you opt out of the administrative forbearance and continue paying then you will be billed and your auto-debit payments can continue. Please contact your loan provider for more detail.
7. Making partial payments.
Loans that are in forbearance are not penalized if the borrower pays less than the usual monthly amount, what’s more, each payment you make will count towards reducing your overall balance.
8. The grace period.
The grace period is a period of time your payment can be delayed without a penalty (it is usually predetermined by the contract).
If your loan was in the grace period and you were supposed to start repaying it when the forbearance period started you will still receive the administrative forbearance (and in some places your interest may go down to 0%).
9. Loan deferment due to cancer treatment.
If you were deferring your student loans due to cancer treatment then your loans will be placed in the forbearance and then automatically placed back into deferment once the administrative forbearance period ends.
The vast majority of the world’s nations is providing loan deferment options of some sort.
However, the exact rules of deferment may vary according to the country in which you reside and the servicer who provided you with the loan.
In order to find out the exact conditions of your loan deferment please contact your loan servicer.
If you have a choice, shoud you defer your education loan?