The suspension of federal student loan payments has provided much-needed relief to millions of borrowers over the past two years, but it relief comes at a high price.
The Department of Education recently reported that the pause in student loan repayments has cost the government $98.4 billion so far – a figure that will continue to rise until the moratorium is lifted in May 2022. The current student loan forbearance period is costing the federal government about $4.3. billion per month, according to the Congressional Budget Office (CBO).
Several Republican lawmakers have pressed Education Secretary Miguel Cardona to release documents on how the government calculates projected losses on the student loan portfolio in a January 12 letter. That includes portfolio losses caused by borrowers who default on their student loans, which worries lawmakers as student loan repayments are expected to resume in a few months.
Keep reading to learn more about the federal student loan repayment moratorium, including how to prepare for the return to repayment. One strategy is student loan refinancing, which can help borrowers lower their monthly payments. You can compare student loan refinance offers on Credible for free without affecting your credit score.
HERE’S WHO QUALIFIED FOR THE STUDENT LOAN FORGIVENESS UNDER BIDEN
When does the student loan repayment break end?
Federal student loan payments and interest have been suspended since former President Donald Trump signed the CARES Act into law in March 2020. The Biden administration has extended the forbearance several times, most recently due to the variant omicron of the coronavirus, but the student loan payment break is due to expire in May 2022.
“During this time, the Department of Education will continue to work with borrowers to ensure they have the support they need to make a smooth transition to repayment,” President Joe Biden said in a statement. communicated.
Student loan repayment may look different for millions of borrowers who will be making payments to a new loan servicer. Borrowers who were automatically transferred to a new loan servicer should have already received email communications from the Ministry of Education.
Affected borrowers should ensure their contact details are up to date on the Federal Student Aid (FSA) website to avoid missing payments. If your student loan officer has changed, your repayment terms will remain the same, including payment due date, monthly payment amount, loan balance, and interest rate.
If you are unhappy with your current student loan repayment terms at the end of the federal forbearance period, consider refinancing to lower your interest rate and lower your monthly payments. Student Loan Refinance could help borrowers avoid default on their student loan debt.
You can learn more about student loan refinancing by contacting a knowledgeable loan officer at Credible.
SCHUMER INCREASES PRESSURE ON BIDEN TO CANCEL STUDENT LOANS IN 2022
How to prepare for the resumption of student loan payments
Starting in May, federal student loan borrowers will have to start making payments again or risk going into default. Borrowers who are late on their student loan payments may face wage garnishment or have their tax refunds withheld.
If you’re worried about your ability to jump-start your student loan payments, here are some steps you can take to prepare your finances:
- Sign up for Income Oriented Reimbursement (IDR). Federal student loan borrowers may be able to limit their monthly student loan payments to 10-20% of their disposable income by enrolling in an IDR plan.
- Ask for an additional abstention. Some borrowers may qualify for up to 36 months of federal forbearance due to economic hardship or deferred unemployment.
- Reduce your monthly payments with refinancing. A recent analysis by Credible found that qualified borrowers who refinanced a longer-term student loan were able to reduce their monthly payments by more than $250 on average.
Keep in mind that refinancing your federal loans into a private student loan will make you ineligible for government benefits, such as income-contingent repayment and some student loan forgiveness programs.
You can browse the current student loan refinance rates in the table below, and visit Credible to see your estimated interest rate. Then, use a student loan refinance calculator to determine if this debt repayment strategy is right for your financial situation.
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