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How to get ready to repay your student loan when the payment freeze ends : NPR

How to get ready to repay your student loan when the payment freeze ends : NPR
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Elisa Nadorny, host:

This week, the Biden administration extended the pandemic moratorium on student loan payments until May 1 next year. The pause was previously set to expire in just over a month. It’s a welcome relief for more than 41 million Americans of federal student loan debt. They now have an additional three months to prepare to start making their payments. We called on a few borrowers for their feedback, including two in California we’ll hear from now. Here’s Elsa Cavazos, who lives in Los Angeles and does some loans at the same time.

Elsa Cavazos: It feels so refreshing, like, OK, thank God, you know, because I have to actually make a lot of payments every month. And I mean, I was mentally preparing myself to do that in January, you know, like, OK, here we go again (Laughter).

Nadurni: We also spoke to Lauren Quinn, a public school teacher from Los Angeles who holds more than $58,000 in student debt.

Lauren Quinn: It’s just kicking the can down the road. We’re already kind of talking about, how are we ever going to be able to afford that monthly bill again?

Nadorni: So how should borrowers prepare? We contacted Betsy Mayotte for some advice. It is the foundation of the Institute of Student Loan Counselors, a non-profit organization that provides free counseling to borrowers. And Betsy Mayotte is joining us now. Hello.

Betsy Mayotta: Thanks for having me.

Nadurni: There are a lot of questions from many borrowers, so we will deal with them correctly. You know, a year and nine months is a long time for many borrowers who have taken a break from paying these loans. With these ninety extra days, what should borrowers do now before the first repayment?

Mayotte: Well, it depends on their financial situation. In addition to not due for any payments, these loans have an interest rate of 0%. So for borrowers who may be in a comfortable financial position, this could be a great time to pay off as much of this debt as possible at 0% interest. For those borrowers who are financially struggling to prepare, the best thing they can do is make sure they know what type of loans they have. Get an idea of ​​what their payments will be like once the payment pause is lifted and whether they’ll need some help figuring out which option best suits their particular financial circumstances.

Nadorney: The Education Data Initiative says the average federal student loan debt is about $36,000. What if someone can’t start paying their next monthly bill? What should they do?

Mayotte: Well, fortunately, with the Federal Student Loan Program, there are very few lower payment options. Some are based on balance. Some of them depend on the income of the borrower. Fortunately, there are two really good tools to help borrowers know not only what their payments will be under each of these plans, but more importantly, roughly, how much they will pay in the long-run under each of these plans. One such program is the loan simulator on the Department of Ed’s website, studentaid.gov. Then we also have a calculator that does this on our website, which is freestudentloanadvice.org.

Nadourni: So basically, you’re going to put what you know about your situation. The type of game outside of the monthly system can help you and how much will you generally pay?

Mayotte: That’s right. And if you’re the kind of person who goes after loan forgiveness programs like Public Service Loan Forgiveness, these two calculators will also tell you if you’ll get your forgiveness in the long run, which is great. And you only have to enter the numbers once, and it will stream all of this back at you, so you can compare the different plans with each other right in front of you.

Nadourni: You know, as we get closer and closer to repayment, we’re starting to see more student loan scams on social media and in your email inbox. Wondering, what are the tips for recognizing those scams, and how not to fall for it?

Mayotte: I am very glad that you brought up this topic. Student loan scams are one of the big reasons I set up the Institute of Student Loan Counselors, to try and give people a kind of “safe place to go” if they’re looking for advice from a third party. If someone calls you and asks you to enter your PIN or password for your student loan account, that’s a huge red flag. No legitimate student loan company will ever ask you to. In fact, under the recently passed STOP law, it is illegal for them to do so. But that doesn’t stop the scammers. If they promise to forgive you right away without knowing anything about your situation, that’s another huge red flag.

Nadorny: So a lot of borrowers I’ve talked to recently are still hoping that President Biden will take steps to forego student loans entirely. From my report, it seems unlikely that that will happen. What do you think that? Is this an issue that needs a major political solution from your point of view?

Mayotte: This problem has become a bit of a mess. First of all, I agree with you. The chances of 100% loan forgiveness are minimal if not non-existent. Here’s the problem. And that’s why, you know, people who say, OK, it’d be very easy for him to do that. Student loans are not the problem. The problem is the cost of higher education. And it doesn’t necessarily make sense to use American taxpayer money to pay off student loan debt that will pile up again the next day. Forgiving with student loans is like figuring out how to reduce bleeding, rather than figuring out how to prevent cuts in the first place.

Nadourni: I wonder, for borrowers who are listening now, it’s kind of like what’s next on their to-do list? What are the few things they need to do now?

Mayotte: Despite the fact that the downtime has been extended, borrowers should take this opportunity to arrange ducks, so to speak. The first thing they should do is make sure they know where all their loans are because one of them – and the other thing that was going on was that the servants had changed. So make sure you know where your loans are. Federal loans, you can just log on to studentaid.gov, and it will tell you who owns your loans.

The next thing to do is to make sure that loan holders have your correct contact information, such as email, postal mail and phone number. Because when the pause ends, there will be some really important information that they will send you that you will want to see. Then the last thing is to know what your payment will be. Is it affordable? And if not, educate yourself on what the different payment options are and which might be best for you, so you’re ready to send in this application as we come to the end – the true end of this pause.

Nadurni: This was Betsy Betsy Mayotte, founder of the Institute of Student Loan Counselors. Thank you very much for joining us, Betsy.

Mayotte: Thanks for having me. I had fun.

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