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Student Loan Payments Start Again In May – Here’s How To Prepare

Student Loan Payments Start Again In May – Here's How To Prepare
Written by Publishing Team

Since March 2020, federal student loan payments to millions of borrowers in the United States have been suspended. But this temporary forbearance period (which President Biden extended in December 2021) is due to expire on May 1, 2022 — barring additional extensions or alternative measures for student loan relief. If you have federal student loans, take steps now to prepare for when your student loan payments will resume in the not too distant future.

What benefits are federal student loan borrowers getting during the coronavirus pandemic?

The CARES Act and subsequent extensions introduced several relief measures to help federal student loan borrowers weather the coronavirus pandemic. For most borrowers, the three most important advantages of a student loan are:

  • Eligible borrowers do not have to make payments on non-performing Federal Student Loans or FFEL Program loans until May 1, 2022.
  • Interest is temporarily suspended on eligible Federal Student Loans and FFEL Non-performing Program loans until May 1, 2022.
  • Collection efforts for distressed federal student loans and FFEL’s distressed program loans are temporarily suspended.

The latest 90-day extension gives federal borrowers more time to recover financially from the hardships associated with the pandemic. They can use the money that would have been used to make student loan payments for basic expenses, pay off debt, build their own emergency fund, or even pay off more principal on their student loans at 0 percent interest on student loans.

Private student loan borrowers are not entitled to any relief from the government at this time. The same goes for some federal student loan borrowers who have older loans owned by private companies.

However, this does not mean that private lenders are not willing to provide assistance in distress situations. If you cannot pay off your private student loans at this time due to the challenges of COVID-19, you should contact your lender to ask if temporary relief measures are available.

How to prepare for the end of your federal student loan affordability

It is smart to start now to take steps to prepare financially and mentally for when you will resume your monthly student loan payment. Here are four ideas you might want to consider.

1. Continue to make payments

The coronavirus pandemic has affected household budgets across the country. However, if you’re still able to make your student loan payments before the federal payment suspension ends, it could be a great way to pay off your debt faster and save money.

Kat Tritina, a certified student loan counselor, explains why making manual payments on federal student loans during this time may benefit you. “Due to the CARES Act, the federal loan rate is set at 0 percent, so any payments you make will go to principal rather than interest charges,” she says. “Making payments now will reduce the amount of interest accrued later.”

If you’re wondering how much these interest-free payments might save you, either in repayment time or money, a student loan calculator can help you work out the numbers.

2. Pay yourself

Another option you might consider is making your student loan payments to yourself while your monthly student loan service payments are on hold. Even if you can’t pay yourself a full payment for a student loan, you may be able to make a partial payment and put that money into a high-yield savings account.

Once regular payments have resumed (or are about to resume), you can consider two options. First, you can pay a lump sum to the service provider before the interest-forgiveness period on your loan expires. Alternatively, you may choose to keep the money you saved in an emergency fund or use it to provide some extra protection in case you have trouble keeping up with your monthly payments down the road.

However, keep in mind that everyone’s situation is different. If you owe a high-interest debt or have private student loans, you may want to consider making a few different financial moves while your federal student payments are on hold.

3. Apply for other types of assistance

Coronavirus relief measures aren’t the only way to get help with your federal student loans. The Department of Education provides other types of assistance to eligible student borrowers under normal circumstances.

For example, once this automatic forbearance period is over, you can apply to put your federal student loans into deferral if you need to temporarily reduce or defer your payments. However, keep in mind that interest may continue to accrue on your loans even while your payments are on hold.

Applying for an income-driven payment plan is another option you may want to consider. If you qualify, your monthly payment will be adjusted according to your income and family size, and your remaining balance can be discharged after 20 to 25 years of payments.

4. Think if refinancing is right for you

Finally, you may want to see if refinancing your federal student loan will benefit you financially. Refinancing a student loan can help you save money over the repayment period or reduce the amount of your monthly payment.

Of course, it’s important to think carefully about whether refinancing is right for you—especially if you owe a federal student loan debt. If you decide to refinance, you will lose federal benefits such as access to income-driven payment plans and eligibility for loan forgiveness.

Questions and answers about student loan tolerance for coronavirus

Who Can Benefit from Administrative Patience?

If your loan is owned by the Department of Education or if you have a delinquent FFEL loan, you must be eligible for administrative forbearance benefits. Student loan service providers have put eligible student loans into automatic administrative tolerance. You can contact the service if you have questions.

When do federal benefits end?

The federally imposed administrative deduction expires May 1, 2022. So unless there is another extension or law of Congress, regular federal student loan repayments (including automatic payments) will resume after May 1, 2022.

Will my student loan patience be extended again?

President Biden’s decision to extend the patience period for another 90 days marked a change of heart for the administration. A few days before the announcement, White House Press Secretary Jen Psaki confirmed that payments will resume on February 1, 2022.

After extending back and forth with the latest extension, it is difficult to say whether management will call another extension. With inflation and new coronavirus variables affecting the economy, there is a lot of uncertainty. However, the president is expected to continue to take calls from members of his party to offer more comfort to student borrowers, whether in the form of continued patience or widespread tolerance.

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