GREEN BAY (NBC 26) -- Under the CARES Act, borrowers of federal student loans don't need to make payments for the next several months.
Wisconsin Department of Financial Institutions Secretary Kathy Blumenfeld said that forbearance period is a good time for graduates to analyze their financial situation.
“It’s a really good time to reflect," she said. "I call it kind of financial hygiene to really take a look at your financial position right now. The first and foremost is to understand what kind of loan that you’re in.”
The vast majority of loans are federally owned and automatically eligible for forbearance through September 30.
Blumenfeld said what to do during these next several months is not a one size fits all approach. For example, somebody who is doing well financially through this pandemic may want to continue or even add to payments because right now there is no interest on the loans. That means payments are going strictly to principles.
However, somebody who has lost a job or struggled financially may want to use this time to not make any payments. Blumenfeld said this is a good time for those people to build up emergency funds.
Blumenfeld also said to remember what this means for the back end of loans.
“It’s also important to know that it’s not forgiving the loan, what it’s going to mean is if you’ve paused your payments for six months, you’re likely going to have your loan extended for six months beyond that," she said.
If you need help navigating the process, Blumenfeld recommends calling your loan servicer, bank, or speaking with a financial expert.