3 things to do before the imminent restart of student loan repayments
THROUGH Sydney lake26 October 2021, 13:47
Boston College COVID-19 – delayed start for the class of 2020, as seen in October 2021.
Pat Greenhouse â The Boston Globe / Getty Images
It has been 19 months since the initial freeze was placed on federal student loan payments through the CARES Act. And January 31, 2022, will mark the last day of freedom for student loan borrowers to choose whether or not to make their payments; in February, student loan repayments will once again be part of their monthly budgets.
Borrowers wondered if there was a possibility of a further extension of the freeze, but student loan experts said Fortune it is âhighly improbableâ. President Joe Biden and White House officials have also said January 2022 will mark the end of student loan forbearance.
One thing is certain: February 1 is less than 100 days away. With that in mind, federal student loan borrowers need to prime for the impending restart of payments, especially if this is their first payment in nearly two years.
Some federal student loan borrowers have refused to make payments in the hope that debt cancellation might materialize. However, student loan experts warn against this hope and instead encourage borrowers to take a close look at their financial situation and make any necessary adjustments before the forbearance ends.
“Continue to keep the pulse of ongoing discussions,” Kaitlin Walsh-Epstein, senior vice president of marketing at Laurel route, a loan refinancing platform, says Fortune. âMake sure you don’t put your financial future on the back burner until something happens. “
With only three months left before payments will restart, here are three steps you can take now.
Federal student loan officers should contact you regarding restarting your loan payments. For example, I received several voicemail messages from my federal student loan officer, Nelnet, reminding me that payments will be due again on February 1, 2022. Make sure you don’t ignore these calls or letters.
“The most important piece of advice I share with all borrowers, regardless of how long they have to repay their loans, is to read” Stacey MacPhetres, Senior Director of Education Funding at EdAssist Solutions, recount Fortune. âRead all the letters and emails you receive about your loans so you can make informed, informed decisions about your payments. “
However, some student loan managers do not yet seem quite ready for the restart of this huge volume of transactions. In July 2021, Democratic Senators Elizabeth Warren and Ed Markey sent a letter to Biden with the results of a questionnaire sent to the federal student loans services which indicated that companies need more time “to ensure that borrowers are supported when they come back to pay their student loans.”
It’s also important to know that a few student loan managers have terminated their contracts with the federal government, including the Pennsylvania Higher Education Assistance Agency (PHEAA), also known as FedLoan, and Navient, who sold their business. to Maximus. Affected borrowers will now have a new loan service. Borrowers should make sure they have the same agent on duty as before the CARES Act, which suspended payments on federal student loans.
âBorrowers who were in repayment before the CARES Act must identify their loan officer,â says MacPhetres. “They may be able to restart with the service agent they had before the CARES forbearance if loans are in transition, which should be identified on the service agent’s site.”
Understanding your repayment plan
Most borrowers have a mix of federal and private student loans, so understanding your breakdown is critical. The January 31, 2022 deadline also marks the end of the 0% interest rate federal student loan borrowers got during the pandemic.
All borrowers, regardless of the type of loan they hold, can look for refinancing options to lower their interest rate or find other options for the life of their loan. Federal and private loans have their pros and cons, Walsh-Epstein reminds borrowers. For example, federal student loans allow borrowers to consider income-tested repayment options and unemployment protections.
“Do your homework” she said. âUnderstand what’s available to you and what the benefits are for both. Don’t just settle it and forget it. It is important for you to continually review this and understand what your scalable options are. “
Take the time to budget
Now is also the time to create a budget to “make sure those monthly payments match your ability to pay off that debt each month,” suggests Walsh-Epstein.
âA student loan is absolutely a budget item,â she adds. âYou have to understand how much money comes in each month and how much money comes out. “
Over the next three months, MacPhetres says, borrowers should get into the habit of tracking their spending and developing a plan that “takes into account all necessary expenses and eliminates unnecessary spending to free up cash that can be redirected to. the repayment of their student loans. “
To avoid payment defaults, it is important to know when your payment is due each month.
âIt’s also essential to make your payments on time, and if you can’t, you need to communicate this to your server as soon as possible,â says MacPhetres..
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