Student Loan Disaster Forbearance and Other Debt Help After a Calamity

Student Loan Disaster Forbearance and Other Debt Help After a Calamity

Note that the situation for student loans has changed due to the impact of the coronavirus outbreak and relief efforts from the government, student loan lenders and others. Check out our Student Loan Hero Coronavirus Information Center for additional news and details.

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Life can be unpredictable, and if you are affected by a natural or other kind of disaster, it can have devastating consequences. Falling behind on bills, such as student loans or credit card payments, can cause serious damage to both your finances and your credit. Thankfully, there is help available in these situations, including disaster forbearance, deferment and income-driven repayment plans for student loans.

In order to be mindful of your finances before a natural disaster hits and learn how to weather the potential financial storm, let’s review these three topics:

How to get financial help after a natural disaster

Dealing with a natural or other type of disaster can be enormously stressful. Luckily, there are a few ways for you to cover your bills and debt in the immediate aftermath of a natural disaster, so you may at least be able to alleviate some of your financial stress.

To avoid falling behind on payments and damaging your credit score, take action with your debt as soon as possible. Here’s a look at different types of debts and the various to deal with them in times of disaster:

Federal student loans: Forbearance and deferment

Federal student loans have payment assistance options in case of emergencies such as natural disasters. If you have experienced a federally declared national disaster, you should expect that your loan servicer will reach out to you if you are in an impacted area noted on the Federal Emergency Management Agency (FEMA) site. Your loan servicer should notify you of your options if you are having trouble making your student loan payments, and they should also have such information posted on their website.

If the federally declared disaster impacts your place of residence or work, and you are having trouble making your federal student loan payments, you should qualify for natural disaster forbearance. Forbearance will pause or reduce your payments for up to 90 days. If you have experienced a disaster that does not get a federal emergency declaration, you’ll have to reach out to your servicer yourself, as they likely will not contact you if your situation is not listed on the FEMA website.

Keep in mind that forbearance won’t reduce the amount you owe. Instead, your delayed payments will be incorporated into your original balance. After the initial period of up to 90 days, you may be able to request additional forbearance time to pause payments for up to 12 months, depending on your situation. Understand that interest generally still accrues during the forbearance period. You can request a general forbearance by filling out this form.

You might also consider getting a deferment, which also pauses student loan payments. If you have a subsidized loan, you may not even have to worry about interest charges accruing during your non-payment period. You can request an economic hardship deferment by going here.

Federal student loans: Income-driven repayment plans

If you earn a low income after graduation, you might qualify for a repayment plan based on your earnings, allowing you to make manageable federal loan payments without falling behind. Income-driven repayment plans include Income-Based Repayment (IBR), Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE) and Income-Contingent Repayment (ICR).

Following a natural or other kind of disaster that negatively affects your income, you may be able to qualify for such a plan if you don’t have one already, or change your terms if you do. You can apply for an income-driven repayment plan by going here.

Private student loans

If you have private student loans, you may also be able to get forbearance or deferment benefits, but it will depend on your loan servicer. You’ll need to contact your servicer to mention your disaster hardship to see if there’s anything for which you can qualify.

If you’re a student still enrolled in school, contact your financial aid office if you believe your aid eligibility has been impacted.

Personal loans, auto loans and credit cards

Many lenders have plans in place to help you manage your payments in the wake of a natural disaster, but it’s not guaranteed. It’s up to each loan provider to determine what should be offered to customers.

Private lenders aren’t obligated to offer financial assistance, which is why any relief is helpful. Each lender may offer its own type of help. Some will waive late fees, while others might pause payments for a certain period after a disaster event has passed. Contact each individual lender to see what they may be able to offer you in terms of relief options.

Mortgage payments

Not all home loans are created or managed equally. If you have an FHA loan, you might qualify for Federal Housing Administration (FHA) Disaster Relief through the U.S. Department of Housing and Urban Development (HUD).

While it depends on your specific situation, you might be able to get late fees waived if you miss payments. Unfortunately, you’re still responsible for making mortgage payments, even if a hurricane destroyed your home. However, your homeowners insurance should offer some relief in the case of natural disaster, and you may even be able to use a home insurance payout to repay some student loan debt.

Some private lenders offer relief as well. Fannie Mae, for example, may suspend or reduce payments for up to 12 months.

You might also qualify for a loan modification so that, when it’s time to start repaying your mortgage, your monthly payments aren’t too high that you won’t be able to afford them.

How to prepare before a natural disaster hits

Many personal finance experts suggest that you always have an emergency fund of at least six months’ worth of living expenses, which can help in the case of an unexpected disaster.

You can keep these funds in a high-yield savings account or penalty-free CD; just ensure that the funds are liquid so you can access them immediately if needed.

Also make sure you have all your insurance coverage information handy, and consider documenting your property through photographs in case of damage due to a disaster, so you can more easily prove damage to your home insurer or landlord following the incident.

How to stop a disaster from wrecking your finances and credit

You might have a long road to recovery after suffering a disaster of any kind, but don’t let your bills keep you down. Take advantage of programs designed to help you with your student loans and other debt, so you won’t find yourself missing payments and hurting your credit.

Understand that with some disasters, you will likely be contacted by your lender, or get automatic assistance, whether it’s a federally declared emergency or not.

Also, keep in mind that there are all kinds of disasters that might call for student debt aid and other help. For example, when the COVID-19 pandemic took hold of the U.S. in early 2020, the Department of Education announced a special interest-free repayment moratorium.

In the case of other disasters that negatively affect your finances, you might have to reach out to your lenders to request assistance. Just be sure to do this as soon as possible, and also make sure you are prepared as much as possible ahead of any potential disaster. You can read more in our post about how to make a financial plan and stop struggling.

Rebecca Stropoli contributed to this report .

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