Student loan debt weighs heavily on borrowers as federal student loan payments are set to resume in October 2021. Read on to see if the payment hiatus will be extended and what to do with your student debt in the meantime. (iStock)
Student loan borrowers have not had to make any payments on their federal loans since the CARES bill was signed in March 2020, but this hiatus is slated to end on September 30th.
The Biden government is facing pressure from Democrats to extend the payment break until March 31, 2022. However, it is unclear whether the president will actually extend the grace period beyond the September deadline for the 43 million Americans with federal student loans.
Here’s what to know about when your loan payments will resume and what to do with your student loan debt in the meantime, such as:
You should consider refinancing your private student loans while interest rates are at all-time lows, although refinancing your federal loans has some drawbacks. Compare student loan refinance rates on Credible to see if this is the right step for you.
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It is possible that the payment break for the student loan will be extended
Proponents of extending the student loan payment break cite unemployment and income data as the reason why the deferral period should be extended. The economic recovery from the coronavirus pandemic is still ongoing, but the unemployment rate among recent college graduates has still not fully recovered to pre-pandemic levels.
Education Minister Miguel Cardona has said that extending the break “is out of the question” and that the Biden government is studying such dates to determine their next steps.
“Of course we will always be guided by what the data tells us and where we as a country stand in terms of the recovery from the pandemic. It’s not ruled out, but at this point, it’s September 30th. “
Democratic MPs in the House and Senate sent a letter to President Joe Biden on June 23, asking him to extend the student loan deferral until March 2022. The coalition is led by Senator Elizabeth Warren (D-Mass.) And Senate majority leader Chuck Schumer (DN.Y.).
“Failure to extend this break would not only harm our nation’s struggling students, but could also affect future economic growth and recovery,” said Schumer.
Following the example of prominent Democrats, more than 120 organizations, including the American Civil Liberties Union and the National Consumer Law Center, demanded Biden in a letter to the president dated Jan.
Biden is under pressure to extend the pause in federal student loan payments for a while, but so far there has been no guarantee from the Department of Education.
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What are you doing with your student loan in the meantime?
With so much confusion as to whether or not student loan payments will resume in October, it’s safer to assume it will. In the meantime, here are a few things you can do to prepare your finances for loan repayment resumption:
- Refinance your personal student loans while interest rates are low.
- Set aside the extra cash when the student loan payments resume.
- Inquire about additional federal forbearance programs.
Refinance your personal student loans at low interest rates
It is not recommended that you refinance your federal loan now as it will keep you out of federal safeguards like income-based repayment plans, interest-free deferral, and possible student loan issuance. But if you have private student loans, it is wise to refinance now because interest rates are historically low.
Student loan interest rates hit record lows in June 2021, according to Credible. The average interest rate on a 10 year loan has fallen to an all-time low of 3.50% for borrowers with a credit score of 720 or higher who refinanced their loans on Credible. The interest rate on 5-year floating rate loans fell to 2.88%, which is the lowest value in all of 2021.
If you can secure a lower interest rate on your home student loan, you can potentially lower your monthly rate, pay off your debt faster, and save money over the life of your loan.
The estimated interest rates can be found in the table below. When you’re ready to refinance your student loans, compare rates on an online loan marketplace like Credible to ensure you are getting the lowest possible interest rate for your situation.
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Set aside the extra money when payments resume
Coronavirus loan forbearance provided a much-needed break for some borrowers who otherwise could not have made their monthly payments. But forbearance may not have been required for all borrowers, and it may be possible to increase your savings so that you are prepared to resume loan repayment.
Also, if possible, you might consider continuing to make payments on your federal student loan to settle the principal balance while the interest rates are at 0%. This can save you money on interest over the life of your loan and help you pay off your college debt faster.
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Inquire about additional federal forbearance programs
The current payment pause automatically applies to all federal student loan borrowers, but there are other ways to pause your student loan payments upon request. Check if you qualify for one of the following federal programs:
- Unemployment Forbearance: Unemployed federal student loan borrowers can apply for their loan to be deferred for up to 36 months. During this time, no interest is usually charged on subsidized loans, but always on unsubsidized loans such as PLUS loans.
- Economic necessity: If you are employed but are still having problems paying your federal student loan, you can request that your loan be deferred due to an economic emergency. This has the same terms as unemployment suppression, but it can be more difficult to obtain.
- Income-oriented repayment plans: Borrowers who do not qualify for a student loan deferral may consider signing up for an income-based repayment plan that limits your monthly payment to a percentage of your income, generally around 10-20%.
If you’re still not sure what to do with your student loans, reach out to a seasoned Credible loan officer who can help you figure out the best course of action.
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Do you have a finance-related question but don’t know who to contact? Send an email to the credible money expert at moneyexpert@credible.com and your question could be answered by Credible in our Money Expert section.
source https://collegeeducationnewsllc.com/will-biden-extend-student-loan-forbearance-again-heres-what-we-know/
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