How to prepare for the end of the student loan payment break – The Hill

The story at a glance

  • Experts say student borrowers should take certain steps to prepare for the start of the repayment period, even if there is another extension or form of loan forgiveness.

  • “Budget for Reimbursement Restart by looking at your budget to find where you can cut back, and maybe start saving that amount to make Reimbursement Restart easier,” says one expert. “If you don’t have expenses you can cut, consider increasing your income.”

  • “Assume you are going to have to start making payments again and plan for it,” added another expert.

The latest extension of President Biden’s student loan payment freeze has given millions of borrowers a bit more time to prepare for possible repayments, but experts say there are steps borrowers should take to prepare even if there is another extension or loan forgiveness.

The student debt crisis has left an estimated 43 million borrowers with $1.7 trillion in collective debt. That has led to growing calls from progressive Democratic lawmakers and the president’s advocates for him to consider widespread loan forgiveness — a move Biden has recently discussed publicly.

“I’m looking at facing some debt reduction,” Biden said in late April. “I am not considering a $50,000 debt reduction, but I am carefully considering whether or not there will be additional debt reduction and will have a response on this within the next two weeks. .”

A recent California Policy Lab analysis showed that the average debt of borrowers included in the break is around $36,800. About 31% of borrowers owe $10,000 or less.

Still, experts suggest that Americans with student debt are now preparing for repayments, even if they expect another extension of the break or some form of loan forgiveness.

Student loan expert Mark Kantrowitz recommends borrowers update their contact information, so they can receive important updates about their payment amounts, due dates, and when the moratorium may end. A borrower could consider setting up automatic payment by providing essential banking information, he added.

Next, a borrower must assess his budget.

“Budget for Reimbursement Restart by looking at your budget to find where you can cut back, and maybe start saving that amount to make Reimbursement Restart easier,” Kantrowitz said. “If you don’t have expenses you can cut, consider increasing your income.”

The average monthly payment for someone with a bachelor’s degree in the United States is $448. Payments for master’s degree holders, however, average nearly $700 per month.

A borrower could boost their income by considering a side gig, asking their employer for a raise, or finding a new job, Kantrowitz said.

Kantrowitz stressed the importance of these actions, although he believes this will not be the last extension of the reimbursement pause.

“Do it now,” he said, “even though it’s probably not the last extension of the payment break and interest relief.”

Kantrowitz isn’t alone in thinking borrowers should use this time to move forward. Given the administration’s aim to provide some form of loan forgiveness as well as a plan for borrowers to re-enter the payment period in good standing, experts say payments are unlikely to resume in September .

“The administration also announced a slew of waiver programs and reforms designed to correct historical (and current) failings in the system,” said Sarah Sattelmeyer, project director for education, opportunity and mobility in the New America’s Higher Education Initiative. America. “Borrowers should ensure they take the necessary steps to access these programs.”

Biden’s latest extension to the payment freeze has offered currently defaulting borrowers a “fresh start” once payments resume. The “fresh start” would not actually cancel the debt, but it would reduce penalties for borrowers that could help them pay their bills and restore their credit.

Before the pandemic, millions of borrowers were in default or late on their student loans. This can trigger collection charges, negatively impact credit scores, and result in wage garnishment to repay the loan.


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Kantrowitz and Sattelmeyer both advise looking for income-contingent or additional forbearance repayment options, if borrowers are still struggling financially.

Borrowers could take advantage of the recently revised Public Service Loan Rehabilitation (PSLF), which was designed for public service workers to get their loans canceled after ten years of employment.

Some reforms notably allow all payments made by eligible borrowers to be taken into account in the PSLF, regardless of the type of loan or the payment plan. Military service members and federal employees also began automatically receiving PSLF credits through federal data matches.

Additionally, the Department of Education has begun reviewing previously denied PSLF applications for errors and has given borrowers the opportunity to have their PSLF decisions reconsidered.

Still, some experts say student borrowers, especially those who kept their jobs during the pandemic, might have been much better off had they used the time to make payments or save for a possible restart.

“Let’s say you have to start making payments again and plan for that,” said Sandy Baum, senior fellow at the Urban Institute’s Center on Education Data and Policy.

“If you don’t have to, great,” Baum continued. “It just doesn’t make sense to be shocked that this debt that you actually have, you’re going to have to start paying.”


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Published in May. 11, 2022

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