Remember student loans? How to prepare for the end of pandemic tolerance
After nearly two years of pandemic relief, federal student loan payments are expected to resume in February. Now is the time for borrowers to reassess their budgets and familiarize themselves with their payment plans.
âFederal forbearance has provided much needed relief for student loan borrowers during the pandemic, but it was always meant to be temporary,â said Jessica Ferastoaru, student loan advisor at Take Charge America, a national loan counseling agency. credit and nonprofit student loans. âWith payments resuming in a few weeks, borrowers should quickly create a game plan that works for them, taking into account loan status, employment and income. “
Ferastoaru shares options that borrowers should consider as the end of forbearance nears:
â¢ Confirm your agent (s): With several agent changes during the forbearance period, the company handling your loan may have changed since you made your last payments. Visit studentaid.gov to confirm your loan officers.
â¢ Explore Income-Based Repayment Plans (IDRs): If your income has declined in the past two years, request an IDR plan at studentaid.gov for a lower payment. IDR plans cap payments based on income and family size, adjusting as circumstances change. You must renew your certification annually. If you are already on an IDR plan, your recertification date may have been extended during the forbearance period. Contact your repairer to confirm.
â¢ Learn about other options: If you don’t qualify for an IDR plan and can’t afford your payment, ask your agent for additional options like deferral or greater forbearance. In both options, payments are suspended, but with a deferral, interest on subsidized loans can be waived, while interest will accumulate in the event of forbearance.
â¢ Manage delinquent loans: To avoid wage garnishment or tax refund offsets, make sure your loans are no longer in arrears. Options include consolidating or rehabilitating loans. Consolidation combines your loans into a brand new loan that you agree to repay under an IDR plan. After three consecutive payments, you can change your plan, if you wish. As part of the rehabilitation, borrowers agree to make nine consecutive payments on time over a 10-month period to get out of default. If your loans are currently being pardoned, make sure you don’t miss your first payment after the forbearance. If you miss more than one rehabilitation program, you may be removed from the program.
â¢ Reinstate Automatic Payment: If you had set up automatic payments before Pandemic forbearance, contact your service agent to confirm if you need to re-register to ensure you do not miss your first payment. Your account status will change from “current” to “past due” after a single missed payment on a federal student loan. If your loan becomes 90 days past due, it can negatively impact your credit.
For step-by-step advice on student loan repayment options, check out Take Charge America’s student loan counseling services.