Student Loans: Their Current State & What to do Next
At the onset of the pandemic, in anticipation of economic challenges and concerns looming for nearly 43 million loan borrowers, student loan assistance came when legislation passed within the CARES Act, providing a student loan payment pause and interest waiver through September 30, 2020 on federal education loans held by the U.S Department of Education. Fast forward over one year, three extensions later, and federal student loans are at a standstill. We want to recap the current relief that is available on student loans, as well share some strategies you can take now, and going forward as the relief expires.
Current Relief Available:
- Interest and monthly payments on federally held loans are suspended through September 30, 2021.
- You do not need to contact your student loan servicer or take any action on your federally held student loans.
- Make sure your servicer has up-to-date contact information and check your mail or email so you can receive any updates or information about your loans.
- Suspended payments through September 30, 2021 will count towards any student loan forgiveness program, as long as all other requirements of the loan forgiveness program are met.
- The Department of Education has stopped the collection of defaulted federal student loans.
- Private student loans are not covered by the COVID-19 emergency relief assistance
What strategies can you take at this time?
· During this continued period of 0% interest until September 30, 2021, you can make payments which will be fully applied to the principal balance. If you are in the financial position to do so, this is encouraged, as it is always a good thing to pay down on 0% interest loan! (Albeit temporary)
· If you are concerned about more pressing household expenses such as your mortgage, rent, insurances, medical, utilities and groceries; you may want to consider taking advantage of the student loan payment suspension to ensure that you are able to cover your basic needs during this time of uncertainty.
· Another reason to take advantage of the student loan payment suspension is if you currently lack sufficient savings. Have some savings can be the catalyst in protecting you in the event of financial emergency, avoiding debt, as well as reducing your financial stress.
Preparing for Repayment to Resume:
· When the payment suspension ends, you’ll receive your billing statement or other notice at least 21 days before your payment is due.
· Check out the new tool, Loan Simulator on https://studentaid.gov/loan-simulator/ to find a repayment plan that meets your needs and goals, or to decide whether to consolidate your loans. Loan Simulator can help you estimate payments under a variety of repayment plans, including income-driven repayment (IDR) plans.
· How can you find out how much your payments will be when payments restart? To find out what your payment amount will be, you will want to contact your loan servicer, as they are your official source for up-to-date information about your loan and repayment.
· Are you concerned that your student loan payment will be too high when payments resume? You may be eligible to lower your monthly student loan payment by enrolling in an income-driven repayment plan. Under an IDR plan, payments may be as low as $0 per month.