Student loan bills are coming back. Here’s what you need to know
THROUGH Sydney lakeAugust 19, 2021, 02:00
As students across the country graduate with massive debt, advocates display a hand-painted sign on the ellipse outside the White House calling on President Joe Biden to sign an executive order to cancel student debt, such as we saw it in June 2021. (Paul Morigi â Getty Images)
As students across the country graduate with massive debt, advocates display a hand-painted sign at the Ellipse in June 2021, calling on President Joe Biden to cancel student debt. (Paul Morigi â Getty Images)
President Joe Biden officially extended the freeze on student loan payments until Jan.31, 2022. But White House officials say it will be the last such extension. February will mark the end of the student loan forbearance that has been in place since March 2020, when the COVID-19 pandemic first hit.
Simply put, student loan bills are coming back.
Some borrowers continued to pay off their federal student loans, while others redirected those funds to savings or were forced to use the money for living expenses while they were unemployed. No matter what borrowers choose to do in the past 18 months, it’s time to prepare for the changes coming early next year, student loan experts agree.
âI certainly hope this extension will give people a little more time – if they haven’t prepared – to be ready,â says Christine Roberts, head of student loans at Citizens Bank. And there are ways to prepare now for those payments to resume in just over five months.
Consider your options
For starters, Roberts suggests evaluating where your money was redirected during forbearance. Did you put it in a savings account? Or have you spent it on other necessities or things you want?
âThere are a lot of options for people, but I think they need to take a step back and think about it,â says Roberts. Borrowers might consider refinancing for a lower interest rate and longer loan term, or consider consolidating their loans.
Ask yourself this question: can I make the required payments in January? Otherwise, a good option may be consolidating or consolidating multiple loan payments into one with a consistent interest rate and loan term, Roberts says.
Refinancing is another alternative for borrowers who will find it difficult to make their payments when they resume. Caitlin Jones, a recent college graduate, envisioned this option as a way to find a lower interest rate and longer term for her four separate payments (including three private loans and one federal loan).
âIf I weren’t in the process of refinancing, there would be no way to pay the three separate payments that I originally had with the high interest rates,â Jones says. âKeeping payments low was my first goal because I knew I wasn’t going to be able to pay such large sums in a short period of time. ”
Jones worked with Financial Splash, a student loan refinancing marketplace, to find the lowest monthly payments and now all she has to do is make one payment on her private loans each month. âFor someone like me who has higher student loans, I think this is definitely the way to go,â she says.
Can my student loans be canceled?
It is possible, but the prospect of such a reform remains largely unknown.
There have been a few signals in recent months that debt cancellation may be on the table. Congressional leaders, including Senate Majority Leader Chuck Schumer, a Democrat from New York, and Senator Elizabeth Warren, a Democrat from Massachusetts, are strong supporters of debt cancellation. Additionally, the Department of Education hired Toby Merrill, a student debt cancellation advocate and ally of Warren. Merrill’s research was used to support Warren’s 2020 presidential campaign proposal to order the Education Secretary to write off $ 50,000 in student debt from each borrower.
But Biden’s plan to support the repayment of $ 10,000 per borrower was omitted from his most recent budget proposal, so there is no clear signal as to whether broader debt forgiveness is an issue. possibility.
“I think a lot of people are sitting on the sidelines waiting for that to happen whether or not it happens,” said Roberts. “Individuals need to weigh what they think the government will or will not do in the next few months.”
Know what’s coming
Roberts reminds borrowers that we are currently in an âincredibly low interest rate environmentâ and that as inflation continues to rise, interest rates will also rise.
âNow is the time for them to really consider their options,â she advises borrowers. âDon’t wait until January when everyone wakes up. Start now with what is your plan.
Jones didn’t make payments on her federal student loan during the freeze, but she redirected those funds to her larger private loan and savings account.
âHaving a little bit of savings at least if something were to happen was more of a priority for me than paying the government back,â she says. “I’m waiting for them to make us pay for them.”
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