This Stimulus Package is designed due to an outbreak of COVID-19 and it is also named as CARES Act which is for those who are suffering financially and have been in debt of loan by the federal government. According to this Act, the payments and the rate of interest have been temporarily canceled to provide some relief to students especially till 30th September 2020.
But unfortunately, students who have taken a loan from several other lenders, credit unions or private banks which is supposed to reduce the financial stress because of this epidemic over students but exactly not doing anything. These lenders are not giving any relief to anyone, no late payments allowed and no adjustments in interest. Even those who are suffering from job loss also, they also have to pay their debt on time.
COVID-19-helping hand for a few borrowers
Still, there are some private loan providers, who are providing a sigh of relief to the students and allowing them to pause their payments for a month or two and there would be no interest rate charged by them. Due to this, lenders are offering more term for repayment without any extra cost which would be a loss for them. And borrowers are saving their whole monthly income.
One of these borrowers, Justin who have borrowed a student loan from private lender said “ I haven’t got full salary this time, still my lender has deducted the money from my account”, his loan is working on 11.30% of interest whereas the rate of interest of loans borrowed by federal student loan is around 4.50%. People who take loans from private loan providers are those who can’t complete the eligibility criteria that’s why no option left with them to borrow money with high interest.
He also tried to contact his lender but they said they can provide him the relief of one month as there would be no late payment charges but he has to pay interest for that month. In fact, the lender told them that they are increasing the cost of the loan for some borrowers as now some people are not qualified for the offers that they have provided. And there would be an automatic debit of the amount from the borrowers’ account.
There is one more reason that people go for private lenders because the limit that federal loans provide $12,500 which is less and not sufficient to fulfill all the expenses. Or it also can happen that the school they are opting for is trying to allure them to take their private loan.
According to the Scott Buchanan who is an executive director of a membership organization (Private and Federal), it will create trouble to the private loan providers if they also provide relief to the borrowers by offering them no interest for few months and allowed them to pay late because they also have to pay the investors who clench the loan. And if this obligation will be broken then many other issues can be generated in the market. So, it’s important to take care of this also while offering the subsidy to the borrowers.
It is the terrific situation held in the USA this time because of COVID-19, the maximum number of people are not able to repay the loan which they have taken for their small commercials or household things. This is the high time when a lot of people of America are in debt and if in case these millions of netizens will not pay off then there would be a great difficulty for banks also. Banks also want to help the citizens by offering them some relief but the main question arises that if they can afford this?
Now due to coronavirus, people come to know about the importance of loans by the federal government which provides lower interest rates and can help them in such an epidemic also. Hope this situation can be handled soon and people of the US can live their life on normal track by beating this fear of coronavirus.