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Student Loan Debt

Student Loan Suspension: What Does It Mean?

The President is Suspending Student Loan Interest. Here’s What it Means.

On Friday, March 13, 2020, President Donald Trump announced he would be freezing student loan interest as part of a package of emergency executive actions designed to mitigate the economic fallout from the coronavirus outbreak. The unprecedented move will provide relief to the 42 million+ Americans who owe more than $1.5 trillion in outstanding federal student loans.

Since this announcement, there has been much confusion about what this freeze actually means for student loan borrowers. To help clear up some confusion, we will attempt to answer some of the most common questions about the freeze.

What does a student loan interest freeze mean?

With the president’s student loan freeze in effect, no further interest will accrue on certain federal student loans until further notice. Borrowers will only be responsible for paying the principal payments due on the loan for as long as the freeze is in effect.

Which loans are included in the freeze?

The interest freeze only applies to student loans that are “held by federal government agencies,” such as the U.S. Department of Education and its contracted student loan servicers. Loans issued by private borrowers are not subject to the federal interest freeze (unless indicated by the lender). In addition, some federally guaranteed student loans, including federal Perkins loans and FFEL-program loans, may not be subject to the interest freeze if they are not held by a federal government agency.

How long will the freeze be in effect? 

As part of the administration’s relief efforts during the coronavirus outbreak, the interest freeze is temporary. It will be implemented automatically and continue until the policy is officially changed. The end date for the freeze has not yet been determined.

Does the interest freeze include any student loan payment relief? 

The student loan interest freeze does not include any student loan payment relief. College graduates who are paying off their student loans must continue to make their monthly payments as usual. The move only affects the interest on qualifying federal student loans going forward.

How does the freeze affect borrowers who have already accrued a significant amount of outstanding interest?   

All outstanding, non-capitalized interest must be paid before payments made during the freeze will apply to loan principal.

If the borrower has defaulted on their loan, the “forced collections” implemented in case of default will continue as usual. This includes the borrowers being subject to wage garnishment, offset of Social Security payments and automatic confiscation of federal and state tax refunds.

Trump’s interest rate freeze will halt balance growth and reduce the cost of repayment for some borrowers; however, it will not provide direct student loan relief for borrowers who are struggling to meet their loan payments due to lost income because of the coronavirus outbreak.

Have you found yourself in a financial bind due to the affects of the coronavirus outbreak? Don't hesitate to give us a call. We're here to help!

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  • What can I expect in regard to credit limit?

    The credit limit on your Listerhill business credit card will be dictated by numerous factors, including your current debt-to-income ratio. Although there is no single answer to this question, it is worth noting that small business owners in 2016 had a median total credit limit of $56,100 across all of their credit cards. If you are concerned about the credit limit you are granted, our account representatives are here to provide you with assistance. 

    Your credit limit may also be affected by your personal credit score. If your FICO score is below a certain threshold, you could find yourself with a lower credit limit than you would like. The good news is that there are many steps you can take to improve your FICO rating, ultimately increasing your credit limit over time.

  • Will my personal credit be impacted?

    Generally, business owners’ personal credit scores are not affected by business credit card applications. Talk to your Listerhill Credit Union representative if you have any questions regarding your personal credit score and how it could be impacted. 

    It is important to note that if your Listerhill business credit card activity does appear on your personal credit report, there will be no differentiation between the two. In other words, business expenditures will be treated the same as personal purchases by the credit bureaus. Thus, it is crucially important to keep your new business Visa in good standing.

  • Why should I choose the Listerhill Business Credit Card?

    We know you have a lot of choices when it comes to applying for a business credit card. At Listerhill Credit Union, we take pride in providing our clients with more benefits than they can count! First and foremost, you will have access to the best customer service in the industry. You are more than a number to us and we will always be here to provide you with the assistance you need.

    We also provide our clients with peace of mind if their Visa cards become lost or stolen. Whether you drop your card while running errands locally or it gets stolen on an overseas business trip, our team is here to make sure you are taken care of. 

    Finally, the advantages of the Listerhill Business Visa itself are worth the application. Our rates and fees will always remain competitive, so you can trust you’re never paying too much for your business expenses. You will also earn the aforementioned rewards on eligible purchases every time you use your card.

  • When can I apply?
    • Starting April 3, 2020, small businesses and sole proprietorships can apply for and receive loans to cover their payroll and other certain expenses through existing SBA lenders. 
    • Starting April 10, 2020, independent contractors and self-employed individuals can apply for and receive loans to cover their payroll and other certain expenses through existing SBA lenders.
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    All businesses - including nonprofits, veterans organizations, Tribal business concerns, sole proprietorships, self-employed individuals, and independent contractors - with 500 or fewer employees can apply. Businesses in certain industries can have more than 500 employees if they meet applicable SBA employee-based size standards for those industries.