You have heard the great news that some of those $2 trillion dollars in Coronavirus Aid, Relief, and Economic Security Act (CARES) Act are meant for families like yours. The good news if you or a loved one have Federal Direct Loans, relief is on its way. However, if you are a parent of a college student, you are getting short changed.
Our Stimulus Check
The CARES Act created the most substantial rescue package in our nation history. Although pushing back the federal income tax deadline created a sigh of relief for many Americans, the reality of the federal government sending direct cash payments was the biggest win.
Those with dependents under 17 years old:
If you are a married couple making less than $150,000 in adjusted gross income on your latest tax return, then you will qualify for $2,400 PLUS $500 per kid you claim. If you are a head of a household and make less than $112,500 in adjusted gross income on your latest tax return, then you will qualify for $1,200 PLUS $500 per kid.
Those with dependents 17 or over:
The bad news is that a taxpayer who claims a full-time student between the ages of 17 and 24 as a dependent loses. They will not get the additional $500 stimulus funds per dependent. There is even more bad news, the 17 to 24 years old college students (claimed as dependents on their parents tax returns) can not claim the $1,200 themselves.
Those not claimed as dependents by others:
Individuals making less than $75,000 not claimed as dependent by anyone else are eligible for $1,200. This means that any college students who are not claimed as dependents by their parents anymore will qualify for the stimulus funds.
For more details on what you need to know about these stimulus dollars, we recommend you checking out the SmartAsset’s Coronavirus Stimulus Package infographic.
Stimulus Benefits for Student Loan Borrowers
With a $1.6 trillion student debt crisis in the US, the CARES Act included the “Education Stabilization Fund” that includes provisions to help student loan borrowers weather the economic storm of the coronavirus outbreak. There are a ton of other provisions for schools and employers in the “Education Stabilization Fund,” so check out Institute for College Access & Success summary for more insights to these provisions.
Student loan borrowers in school or deferment:
If you are currently enrolled at least half-time or have another deferment and have a Direct Loan, then any unsubsidized interest accrual has been automatically suspended until September 30, 2020. This means you will win with 6 months of free interest payments just as if these loans were subsidized.
Student loan borrowers in repayment:
If you are in repayment on a Direct Loan, your payments have been automatically suspended until September 30, 2020. Yep - this means one less bill to take care for 6 months! It will also help win by building good credit because the feds will report suspended payments to national credit bureaus as if they were regular monthly payments made by the borrower.
Plus, if you have been headed down the path of Public Service Loan Forgiveness, we have more good news to feel like you closer to winning the relay race. These 6 months of payment suspension will count as “qualifying payments” toward your 120 on-time payment requirement.
Student loans in collections:
If a federal student loan borrower defaulted, the federal government has suspended wage garnishment, tax refund offsets, and federal benefit offset (e.g., seizure of Social Security benefits). Although this does not solve your collections issue forever, it can give you time to get back on your feet and explore loan rehabilitation.
Colleen MacDonald Krumwiede is a financial aid and paying for college expert with over a decade of financial aid experience at Stanford GSB, Caltech, and Pomona College and another decade at educational finance and technology companies servicing higher education. She guides go-to-market strategy and product development at Quatromoney to transform the way families afford college.