The Discerning Investor by Julie Jason

September Thoughts: College Savings and Loans

What do you think about in September? If you are like me, September brings up memories of going back to high school after a summer of pure bliss. This year, due to the coronavirus, things are a little different.

Take college students, for example, for whom September often signals a return to school. Yet at Harvard, approximately 20% of the freshman class (340 students) deferred attendance this fall. Back in August, a survey released by SimpsonScarborough, a higher education research and marketing company, found that 3 in 4 students were either somewhat or very worried that they might contract COVID-19 if they went to campus for in-person instruction during the fall semester.

Even college football has been affected, with schools like Notre Dame canceling games due to COVID-19 outbreaks.

September also is National College Savings Month, and while many parents are focusing on various ways to save money for their children’s future college education, there are roughly 45 million people who continue to work on paying off their college debt (an estimated $1.6 trillion as of the first quarter of 2019, according to the Federal Reserve Board). COVID-19 has affected their situation as well -- with possibly positive results.

Thanks to the CARES Act, signed into law on March 27, 2020, if you have certain types of college student loans, you have been provided “temporary payment relief.” That relief has since been extended through Dec. 31, 2020.

What do you need to do? The Federal Trade Commission has offered some good advice.

First, see if you qualify. The loans need to be federal student loans, and even then, not all of them are eligible. For example, older Family Federal Education Loans (FFEL) or Perkins Loans that are owned by the school you attended do not qualify.

If in doubt, contact your federal loan servicer (tinyurl.com/y4w8p4dz) online or by phone to find out if your loans are eligible. This is important: relief only applies to your qualifying federal student loan.

Second, if your federal loans do qualify, they have already been placed (by the U.S. Department of Education) into “administrative forbearance.” During this period (through Dec. 31, 2020), you do not need to make payments, and no interest is due.

Third, check to see if you can get a refund if your payments are processing automatically through your bank (starting from March 13, 2020). If so, you may qualify for a refund as part of administrative forbearance. (However, it’s my advice not to do so, since it’s better to lower your student debt, and these payments were “painless” for many people, since they were automatically withdrawn from their bank accounts.)

Fourth, if you are still making payments, you do have the option of stopping them through Dec. 31, 2020, without penalty.

Fifth, if you keep making payments through Dec. 31, the interest rate is now 0%. That’s a big incentive to keep making those payments -- you will pay off your loan faster.

Sixth, if you happen to be on an income-based repayment program and/or a forgiveness program, go to Federal Student Aid's Coronavirus page (tinyurl.com/v8om83u) to find out what options are best for you.

If you would like further advice from the Federal Trade Commission, visit tinyurl.com/y5nnnyaj.

On another note, if you are interested in learning investment basics, join me for a virtual presentation, “Should You Invest on Your Own or With an Adviser?” on Wednesday, Sept. 30, at 10:00 a.m., sponsored by the Greenwich (Connecticut) Library. To register, go to tinyurl.com/yyl569zc or contact Yang Wang, 203-622-7924, ywang@greenwichlibrary.org.

Julie Jason, JD, LLM, a personal money manager (Jackson, Grant Investment Advisers Inc. of Stamford, Connecticut) and award-winning author, welcomes your questions/comments (readers@juliejason.com). Please visit www.juliejason.com.

DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION