When Do Student Loans Resume
When Do Student Loans Resume – FOX Business’ Lydia Hu speaks to student loan borrowers frustrated by Biden’s extension of the moratorium on federal student loan payments.
Federal student loan payments have been paused again, and this time it’s been extended until August 31, 2022.
When Do Student Loans Resume
President Biden and Vice President Harris made the announcement earlier this month through the U.S. Department of Education. Federal student loan interest rates were frozen in March 2020 as part of the CARES Act—a $2.2 trillion economic stimulus bill passed by Congress as a response to the COVID-19 shutdown.
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While federal student loan delinquencies have been extended a number of times in the past two years, it’s not immediately clear whether that will happen again. Millions of Americans will need to adjust their finances to address their school debt if they haven’t already.
If you’re not sure how to prepare to make the financial change, here are 14 tips from money experts to help you figure out the best way to resume your student loan payments.
If you’re not already familiar with your student loan terms, it would be beneficial to educate yourself about them before the federal government takes out the loan break.
“The first step you should take is to contact your federal loan officer and get all the eligibility details for your own specific loans,” says Daniel Milan, managing partner at Cornerstone Financial Services.
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Milan added that starting a “dialogue” with your loan officer will probably help you decide which options are better to choose when it’s time to resume loan repayments.
Some borrowers may benefit from exploring refinancing options with private lenders when interest rates rise, according to Milan.
“Even if this would exclude you from the federal moratorium protection, it may still be beneficial to act before [the] expected higher interest rates [we’ll see] throughout the year,” Milan said.
Matthew Grishman, principal wealth advisor at Gebhardt Group Inc., said some borrowers can benefit from signing up for automatic payments because it reduces their chances of accidentally missing a payment.
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“It also provides the benefit of being ‘out of sight, out of mind,’ so you don’t have to think about the debt every month,” Grishman continued. “It can be mentally, emotionally, psychologically exhausting to be reminded every month of the overwhelming weight of student debt—especially if you have to look at it and manually pay your bill every month.”
“Even if it’s another $10 or $20,” he said. “Shaving off ounces like this will add up over time, reducing the time it takes to repay the loan as well as the amount you’ll pay in interest.”
Living like you’re paying off student loans now will help you get used to the act again, according to Jay Zigmont, certified financial planner and founder of Live, Learn, Plan. – a personal finance coaching service.
“Your budget has most likely been filled by other things while you’ve been patient,” Zigmont said. “So, now is the time to start cutting back before it’s necessary.”
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Lauren Anastasio, director of financial counseling at Stash, also suggests that borrowers adjust their spending habits by putting money aside to mimic the actual crediting that will happen when the student loan repayment schedule resumes.
“Try setting aside the amount of your payment each month to get used to the effect on your expenses,” Anastasio said. “It can be extra challenging at first so it’s better to give yourself an adjustment period than to overdraw your account when the actual payment is due.”
If you’re currently enrolled in school, there are benefits to paying off student loans before your actual graduation, according to Lyle Solomon, bankruptcy expert and principal attorney at Oak View Law Group.
“Interest on federal unsubsidized and private loans accumulates during college and is added to your total loan amount,” Solomon said. “Starting to pay off this interest as quickly as possible can help you graduate with less debt.”
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People who have already received or expect to receive a tax refund could potentially use the money they get back to bring down the balance on their student loans, Solomon said.
“You can get tax credits for paying student loan interest [on private loans], so you might have gotten a refund,” Solomon explained. “[You can] put some of your repayment money toward your student loan debt.”
Adding cash to your emergency fund can help if you’re struggling to pay off your student loans. (iStock)
Building a financial buffer can offer a layer of protection before resuming student loans, and you can do this by adding money to your emergency fund, according to Bobbi Rebell, personal finance expert at Tally—an advanced credit limit app.
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“An emergency fund helps you make financially sound decisions when the worst happens. You’re less likely to turn to debt when [something goes wrong] if you have cash in the bank,” Rebell explained. “Set up an automatic draft for your savings every month, so spending that money isn’t even an option for you.”
Paying off high-interest debt now can help ease your student loan payment burden in the future. (iStock)
Rebell would also advise borrowers to pay down as much high-interest debt as they can before student loan repayment starts.
“For most, it’s likely credit card debt. Credit cards are notorious for having high interest rates,” Rebell said. “There are several more interest rate hikes scheduled, so it’s getting more and more expensive to carry debt. Now is the time to deal with it before the student loan payments drag in again.”
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Some borrowers who work in public service sectors like the government or a nonprofit 501c3 organization should check to see if they’re eligible for Public Service Loan Forgiveness (PSLF), says Tobin Van Ostern, co-founder of Savi Solutions PBC — an online student loan repayment resource.
“The PSLF Waiver has eased the rules for obtaining loan forgiveness until October 31, 2022,” Van Ostern continued. “Even public servants who have applied before and been rejected should apply again given the new circumstances.”
Asking your current employer if they have a tax-free student loan repayment benefit available or would be willing to offer the benefit can be helpful for borrowers who aren’t looking for a new job, according to Patricia Roberts, chief operating officer at Gift of College, Inc. – an online gift registry for 529 college savings plans.
“Under the CARES Act, employers can repay up to $5,250 per employee per year tax-free through January 1, 2026 – which can add up to a total of $21,000 for 2022, 2023, 2024 and 2025,” Roberts said. “Given the large layoff going on, employers are open to offering financial wellness benefits such as student loan repayment assistance. Any payments made during the moratorium can be applied against the principal which will help the loan be paid back sooner.”
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Asking for a cash contribution from friends and family can help you lower your student loan balance sooner. (ice cream)
Roberts said student loan borrowers can lower their balance if they request cash contributions “of any size” to their loans or college savings accounts in lieu of physical gifts.
Signing up for income-based repayment plans can help you manage student loan payments if you’re experiencing financial hardship. (iStock)
Borrowers facing financial hardship may want to consider enrolling in an income-based repayment plan, according to Stuart Siegel, president of FAFSAssist.
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“There are other income-driven repayment plans like pay-as-you-earn, which is a federal repayment plan available to borrowers with newer federal loans,” Siegel said. “It limits a borrower’s monthly federal student loan payment to 10% of their discretionary income.”
“Income-driven repayment plans have some similarities,” he continued. “Each limits payments to between 10% and 20% of discretionary income and forgives the remaining loan balance after 20 or 25 years of payments. But the amount forgiven is taxable.”
You can ask your student loan servicer to defer your loan or defer it for a certain period of time. (iStock)
If resuming student loan payments isn’t possible for your financial situation, Siegel recommends looking into “hardship” “no interest” subsidized loan plans.
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“This would be after the moratorium is over,” he explained. “Once the moratorium is over, students can also get a forbearance on all federal loans for up to three years for each loan they have. Of course, at the end of each year, the interest would kick in.” 7 Things to Do Before Your Student Loan Payments Resume First things first : Familiarize yourself with (or reacquaint yourself with) your loans. And don’t count on general loan forgiveness.
A little more than three months. That’s how long it is before some 41 million federal student loan borrowers have to start making loan payments again.
The federal government froze student loan payments at the start of the coronavirus pandemic, and it has extended that freeze several times since then, most recently just before Christmas.
The Department for Education has said payments will resume on May 1. What should borrowers do to prepare? Betsy Mayotte has some ideas. She is the founder of
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