Although federal student loan repayments are expected to resume in May, recent survey data suggests the vast majority of borrowers are not financially ready to repay. To complicate matters further, millions of borrowers are being moved to a new student loan manager amid major policy changes from the Biden administration.
Sen. Patty Murray, D-Wash., is urging President Joe Biden to extend the student loan payment pause to give the administration time to fix broken student loan programs and help student borrowers get better prepare to make their payments.
Murray, who is chair of the Senate Committee on Health, Education, Labor and Pensions (HELP), said she was “pleased to see signs” that the president is considering extending the forbearance period and called on Biden to suspend student loan repayments through 2023.
“I’ve heard horror stories from borrowers of hour-long phone calls with their student loan officers trying to get questions answered, or reading pages of fine print to determine the best repayment plan or how to consolidate loans,” Murray said.
More than just an inconvenience, Murray said it was “a policy failure” with a direct negative financial impact on student borrowers that prevents them from looking for better jobs, buying homes and founding a family.
“This loan system is unacceptable and we can fix it…so until we fix our student loan system, the student loan payment pause must continue to provide borrowers with much-needed relief.”
Keep reading to learn more about the Washington senator’s proposal to fix the student loan system, as well as what you can do to resume payments if the forbearance isn’t extended. One strategy is to refinance your student debt into a private loan with a lower interest rate. You can visit Credible to compare student loan refinance rates for free without affecting your credit score.
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Murray offers plan to fix federal student loan system
Extending the student loan payment pause until 2023 would give the Biden administration time to address critical issues facing federal student loan borrowers, according to Murray.
“We need to be aware that the cost of college continues to skyrocket – so to really get to the root of this problem and put our students on the path to success, the Biden administration needs to continue to work with the Congress to lower the cost of higher education and make sure it actually helps students get quality, well-paying jobs,” she said.
Here’s how Murray proposed to fix the student loan system:
- Rehabilitate borrowers who were in default prior to the student loan forbearance period and clear their negative credit history.
- Ease access to income-based repayment (IDR) plans with a universally available plan that caps monthly payments at 10% of the borrower’s discretionary income.
- Expand relief for applicants to the Public Service Loan Forgiveness Program (PSLF) by extending the PSLF temporary waiver period to ensure public servants can qualify for loan release.
- Cancel certain student loan debt for all borrowers, prioritizing low-income borrowers, borrowers of color, borrowers with more than 20 years of repayment history, and borrowers with debt but no degree.
However, not all lawmakers agree with the idea of canceling student loan debt. The GOP Committee on Education and Labor recently told President Biden that blanket student loan forgiveness “is not a solution” to address the rising cost of college education.
With uncertainty over whether the Department of Education will extend the payment pause or forgive student debt, some borrowers may consider other repayment options, such as refinancing a private loan. You can use Credible’s student loan refinance calculator to see if this option is right for you.
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Should you refinance your student loan?
Refinancing a student loan can help you lower your monthly payments, pay off debt faster, and save money in interest charges. Despite its financial benefits, refinancing is not the right option for all borrowers. Here are some ways to determine if you should refinance:
- Consider the type of student loans you have. Refinancing your federal student debt into a private loan would make you ineligible for IDR plans, administrative forbearance, federal deferment, and certain student loan forgiveness programs like the PSLF. But if you already have private student loans — or if you don’t plan to use federal loan protections — refinancing may be a viable option.
- See what interest rates you may qualify for. While federal student loan interest rates depend on when you took out the loan, private student loan refinance rates are based in part on the borrower’s credit score and debt-to-income ratio (DTI). ). You can see estimated student loan refinance rates tailored to your financial situation by prequalifying on Credible.
- Determine if you can get help from a co-signer. Refinancing your student loans with a creditworthy co-signer, such as a trusted friend or family member, can help you secure more favorable terms on a private student loan. Depending on the interest rate and other terms of the loan, refinancing can help lower your monthly payments and get you out of debt faster.
Before you refinance, you should also weigh your alternative repayment options like IDR plans, student loan release programs, and financial hardship deferral. If you decide to refinance your student debt, you can compare current rates from private lenders in the table below. You can also get in touch with a knowledgeable loan expert at Credible to learn more about refinancing.
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