Loan payment

How to keep your student loan payment at $0

President Biden announced on January 20 that most federal student loan payments would be suspended without interest until September 2021 due to the ongoing pandemic.

Once the hold is lifted, however, a $0 payment may still be a necessity for some borrowers.

According to an October 2020 NerdWallet survey conducted by The Harris Poll, 45% of Americans with federal student loans were not confident they would be able to repay their loans when the payment freeze was set to end last December. .

Hopefully borrowers will be better off financially by September. But if you need to keep paying less, here are your options.

Sign up for income-oriented reimbursement

For a manageable payment, start with an income-driven repayment plan.

“Look at income-based repayment first, because it offers the most benefit,” says Persis Yu, director of the student loan borrower relief project at the nonprofit National Center for Consumer Law.

These benefits can include a discount after 20 or 25 years of payments, partial interest subsidies, and monthly bills as low as $0.

Payments are based on adjusted gross income, family size and federal poverty guidelines. For example, if you had an AGI of $19,000, were single, and lived in the lower 48 states, you would pay $0 for 12 months under most income-oriented plans.

If you’re already using one of these plans and your income has gone down, your payments can go down as well.

“It’s important for borrowers to know that they can request recertification of their plans at any time,” Yu says.

You can estimate payments under different income-oriented plans with the Department of Education’s loan simulator.

Defer student loan repayments

Federal student loan payments can be suspended via deferral and forbearance.

The adjournment is related to events such as losing your job or undergoing cancer treatment. If you are eligible, this option can keep payments at $0.

For example, an unemployment deferral may be possible if you work less than 30 hours per week. If your hours have been reduced, but your household income is too high for an income-based plan, deferment may be a good idea.

The government also covers any accrued interest on subsidized loans during the deferral.

“There are grants on income-driven plans, but they’re more generous with deferment,” says Betsy Mayotte, president and founder of the Institute of Student Loan Counselors, a nonprofit that offers free advice to borrowers.

Deferment is often available for up to three years, but you must reapply periodically. For an unemployment deferment, the duration is six months.

Place loans on forbearance

Payments are currently suspended without interest via a special administrative forbearance. When that break ends, your repairer can give you a discretionary, potentially paperless forbearance.

But in addition to the absence of invoices, this type of forbearance offers few advantages.

“Abstention is a last resort,” says Mayotte. “It’s either that or you’re going to go delinquent or default.”

Interest generally accrues during abstention. When it ends, that interest can be added to the amount you owe, meaning future interest accrues on a larger balance.

With any $0 payout strategy, you may pay out more overall.

“If you can afford it, I would always recommend paying rather than not paying,” says Mayotte.


The most important thing to do now is understand your options, says Scott Buchanan, executive director of the Student Loan Servicing Alliance, a nonprofit that represents student loan servicers.

Part of the reason is that the services can’t change your payments yet.

“It’s a matter of regulation and process,” says Buchanan. “We can’t actually put you in (a) plan right now because you’re not in repayment.”

But you can do the following:

  • Check your information. Log in to your repairer’s website to verify your details and payment amount. If you don’t know who your servicer is, visit the Federal Student Aid website. Mayotte says beware of companies that reach out and offer help for a fee; your repairer will never charge you.
  • Gather the papers. Applications may require documents such as payslips, which Buchanan says should be from the last three or four months when you submit your forms. If you applied now, you will likely need to apply again with more recent information. But you can get a head start by determining what you’ll need and filling in what you can.
  • Set a reminder. With payments expected to resume in October, plan to submit your claims over the summer.

“If you wait until the day before your due date in the month when 30 million people go into repayment,” Buchanan says, “appeal times are going to be long.”
This article was written by NerdWallet and was originally published by The Associated Press.

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Ryan Lane writes for NerdWallet. Email: [email protected]