Federal student loan borrowers have had their payments suspended for another six months, the Ministry of Education announced on Friday. The “final extension” of the COVID-19 emergency forbearance period is in effect until January 31, 2022, giving borrowers more time to plan for resuming payments so they can avoid delinquency.
With this recent development, progressive Democrats are aiming for another goal: canceling student loans. But canceling student loan debt won’t be easy, especially since prominent Democratic lawmakers disagree on how to pass such legislation.
“As our country’s economy continues to recover from a deep hole, this latest extension will give students and borrowers the time they need to plan for the restart and ensure a smooth return to repayment.”
Read on to learn more about student loan forbearance and the next steps in student loan cancellation. Also consider what you should do to prepare your finances for your student loan repayment in 2022, including deferral options and private student loan refinancing.
If you decide to refinance your private loans, visit Credible to compare refinancing rates without affecting your credit score.
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Cancellation of student loans faces hurdles from key lawmakers
As a presidential candidate, Joe Biden campaigned to forgive up to $ 10,000 in federal student loan debt per borrower. In the months since his inauguration, Progressive Democrats called on President Biden to write off student loan debt by executive order – but the party is divided on how to get student loans canceled.
Senate Majority Leader Chuck Schumer, DN.Y., recently said the President can ‘spin his pen’ and ‘use his existing legal authority’ to write off up to $ 50,000 in student loan debt per borrower. In contrast, House Speaker Nancy Pelosi, D-CA, said student loan cancellation “must be a law of Congress.”
âPeople think the President of the United States has the power to write off the debt. It doesn’t,â Pelosi said at a July 28 press conference. “He can delay, he can delay, but he doesn’t have that power.”
Passing a student loan cancellation law by Congress would be difficult because it would likely not gain bipartisan support in the Senate. Canceling student loan debt has been a tough sell for Republican lawmakers, as a Senate court hearing on August 3 demonstrated.
During the hearing, Senator Chuck Grassley (R-IA) said that canceling student loan debt would “massively benefit the rich at the expense of others,” adding that “we should not ask those who do not have not attended college to pick up the tab for those who did. “
For now, with the uncertain future of student debt cancellation, it is important that student borrowers begin to prepare their finances for the resumption of monthly payments.
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How to Prepare Your Finances for the Resumption of Student Loan Repayments
In anticipation of the federal extension ending in February 2022, there are several ways borrowers can avoid default when student loan payments restart:
- Request an additional abstention period. The Ministry of Education offers postponement of economic difficulties and postponement of unemployment, which can suspend payments for up to 36 months.
- Register in a income-based repayment plan (IDR). IDR plans limit the amount of your monthly student loan payment to a portion of your gross income.
- Refinance your private student loans. Refinancing a student loan involves taking out a new student loan with different terms (and a lower interest rate) to pay off your existing student loans.
However, it may be unwise to refinance your federal student loan debt, as it would make you ineligible for federal student aid relief measures like IDR and zero interest forbearance. But if you have private student loan debt, now is a good time to refinance at a lower rate.
Student loan refinancing rates are near historic lows, Credible data shows. See what interest rate you are currently paying on your student loan debt and see how that compares to the interest rates offered by real private lenders in the table below.
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Find out if student loan refinancing is right for you
Refinancing a student loan can help you lower your monthly payments, pay off debt faster, and save money on interest over the life of the loan. But it may not be the best option for all borrowers.
It’s easy to determine if refinancing a student loan could be beneficial for your situation. First, compare the current interest rate on your student loan with your estimated student loan refinance rates on Credible’s online loan market. You can check your rate without impacting your credit score. Then use a student loan payment calculator to see if refinancing can save you money or lower your payment.
If you’re still unsure whether refinancing your private student loans is a good thing, contact a student loan expert at Credible to discuss your options.
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