Here’s What You Can Do to Prepare for the End of the Federal Student Loan Payment Break
Forty percent of borrowers with student loan debt believe the Biden administration should have extended the term of student loans beyond January 2022, according to a new report. Survey from financial services company DA Davidson & Co..
“Our survey highlighted a great need to bring the student loan crisis in check and address the critical conversation that needs to happen between families and counselors to reduce the repercussions from student loans.”
The majority of those surveyed (81%) also believe that the US has a problem with student loans, and 55% are in favor of some sort of broad-scale student loan forgiveness from the federal government.
But with federal loan payments resuming in just a few months — and no plans for widespread loan cancellation in sight — borrowers need to start thinking about their student loan repayment plans. Keep reading to learn how to prepare your finances for the end of federal forbearance, and consider your options like alternative loan forgiveness programs and student loan refinancing.
If you decide to refinance your student loans, be sure to shop around for the lowest interest rate possible for your situation. You can compare rates from multiple private lenders on Credible without affecting your credit score.
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When does student loan forbearance expire?
The pay break on federal student loans expires on January 31, 2022. Student loan servicers will resume collecting student loan payments starting in February 2022.
It is important that you check to see if you have set up automatic payments for your student loans, so you are not alerted when your student loan payment is deducted from your account.
Will student loan forbearance be extended again?
The Department of Education (DOE) announced in August that this would be the “final extension” of the COVID-19 emergency tolerance period. The most recent extension was the fifth time the government deferred federal student loan payments since March 2020, when the Trump administration first issued an administrative prohibition.
This federal student loan forbearance extension also gives the Department of Education time to respond to recent student loan servicer changes. The two big servicers — FedLoan Servicing and Granite State Management & Resources — are terminating their federal contracts at the end of the year, which means the DOE will have to reassign the loans of about 10 million borrowers.
What to do if your student loan service is taking off
How to pay off student loans when forbearance expires
Student loan payments are a significant monthly commitment that can strain your budget and prevent you from achieving life’s financial milestones, such as buying a home. But the consequences of not paying off your student loans are plentiful: Your credit will take a hit and you may even be charged late fees, while interest continues to mount.
Thankfully, you have options if you’re not ready for student loan repayments in February. Here are some tricks to consider.
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Lower your monthly payments by refinancing
Student loan refinance rates are still near historic lows, which makes it a great time to snag a lower rate on your college loan. Refinancing can help you lower your monthly payments, pay off your debt faster and even save money over the life of the loan.
Borrowers who switched to long-term loans at Credible were able to deduct more than $250 from their student loan payments, all without adding to the total cost of the loan.
However, there is a caveat: If you refinance your federal student loans into a private loan, you may face future administrative forbearance, income-driven repayment plans (IDR plans), and even potential student loan forgiveness measures. Like federal benefits would be lost. But you have nothing to lose by refinancing your private student loans at a lower rate.
Browse through the current student loan rates in the table below, and visit Reliable to see your estimated interest rate without affecting your credit score.
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Apply for additional tolerance
Federal student loan borrowers can apply for an additional forbearance of up to 36 months after the moratorium on student loan payments expires. Simply fill out an economic hardship deferment request or unemployment deferment request on the Office of the Federal Student Aid (FSA) website.
If you can’t pay off your personal loans, talk to your lender about enrolling in forbearance. Private lenders have their own policies regarding who qualifies for forbearance and how forbearance works, so keep in mind that interest may accrue during your forbearance period.
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Research Student Loan Forgiveness Program
While comprehensive student loan debt cancellation may still be out of reach, there are some other student loan forgiveness programs:
- Public Service Loan Waiver (PSLF): Public school teachers, military personnel, law enforcement officers and other civil servants may qualify to discharge their remaining student loan debt after making 120 qualifying payments.
- teacher loan forgiveness program: Qualified teachers who teach full-time for five years at a low-income school may qualify for up to $17,500 in federal student loan forgiveness.
- closed school holiday: If your school closes while you were enrolled or soon after you withdraw, you may be eligible to have your student loans forgiven.
- Borrower Defense for Repayment: If your school misled you or engaged in other misconduct, you may be eligible to repay some or all of your federal student loan debt.
Still not sure what to do with your student loan debt? Contact an experienced loan officer of trusted to discuss your options for student loan repayment.
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