The Biden administration recently extended the federal student loan payment hiatus until May 1, 2022, giving eligible borrowers an additional 90 days to prepare for the return to repayment. The move comes after prominent Democrats “strongly” urged the president to provide additional student loan relief amid the economic impact of the omicron variant.
“Now, as our employment recovery is one of the strongest ever … we know that millions of student loan borrowers still face the impacts of the pandemic and need more time before to resume payments, âPresident Joe Biden said. said in a press release.
During the extended forbearance period, payments are suspended and interest does not accrue on certain federal student loans. While this is good news for borrowers who aren’t ready to restart payments, there are a few things you should know about extending student loan forgiveness.
Keep reading to learn more about the student loan payment break, including your alternative debt repayment options, like refinancing. You can view your estimated student loan refinance offers on Credible for free without impacting your credit score.
FSA PREPARES FOR A “SMOOTH TRANSITION” OF THE RESUMPTION OF STUDENT LOAN PAYMENTS
1. Not all student loans are eligible for relief
About 41 million Americans have benefited from the federal student loan forbearance period, according to the White House. But current debt relief measures do not cover borrowers with the following types of student loans:
- Federal loans for family education (FFEL)
- Federal Perkins loans not held by the Department of Education
- Private student loans
In perspective, private loans represent 8.4% of all student debt, according to Education Data Initiative. Private student loan borrowers may have qualified for forbearance through their lender, but interest typically accrues during these deferral periods, increasing the principal loan balance. Alternatively, borrowers with private loans might consider refinancing when interest rates are at record highs.
The average 10-year fixed-rate interest rate fell to 3.33% for qualified borrowers during the week of Dec. 13, according to Credible. These are the lowest fixed interest rates on record since Credible began collecting this data.
Refinancing at a lower interest rate can help you lower your monthly payments, pay off debt faster, or save money on interest over the life of the loan. You can start the application process by comparing the student loan refinance rates between several lenders on Credible.
WHAT TO DO IF YOUR STUDENT LOAN DEPARTMENT CLOSES
2. Payment pause counts towards qualifying PSLF payments.
Student loan forbearance has an added benefit for borrowers planning to apply for the Public Service Loan Cancellation Program (PSLF). Under this program, public servants working for qualifying employers are eligible for payment of the remainder of their federal student loan debt after making 120 qualifying payments.
Months in which payments are suspended count toward the 120 required payments, meaning PSLF applicants will be around two years closer to being pardoned by the time coronavirus aid expires in May 2022. .
The education department Notes that if PSLF borrowers make additional debt payments during the forbearance period, they will not be eligible for PSLF sooner. This means that it is more beneficial not to make additional payments in order to maximize the total amount of the discount.
STUDENT DEBTORS START RECEIVING $ 2B IN PAYMENT UNDER TEMPORARY PSLF WAIVER
3. Payroll collections and seizures are temporarily stopped
The Department of Education has halted collection activity for borrowers whose student loans were in arrears before the pandemic. During the forbearance period, the federal government suspended wage garnishment over unpaid student debt.
If you are not up to date on your federal student loans, beware of suspicious collection activity until May 2022. These could be scams by fraudulent debt collectors who want to take advantage of borrowers who are not. not aware of this relief measure for students.
Student loan borrowers who are at risk of defaulting on their private student loans – or federal loans when the forbearance ends – may consider refinancing to avoid delinquency. Borrowers who refinanced to a longer repayment term on Credible have been able to reduce their monthly payments by an average of $ 250, which can make student debt more manageable.
Keep in mind that refinancing your federal student debt into a private loan will make you ineligible for certain benefits offered by the Department of Education, including income-tested repayment, COVID-19 administrative forbearance, and Federal student loan exemption programs like PSLF.
Browse the student loan refinance rates from private lenders in the table below and visit Credible to see your estimated rate and determine if this debt repayment option is right for you.
BIDEN WANTS CONGRESS STUDENT LOAN FORGIVENESS, BUT LEGISLATORS INTEREST HIM TO USE EXECUTIVE ACTION
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