Just in case you forgot, there is a student loan crisis in America. The amount owed in the United States is more than $1.5 trillion. (Yes, that’s with a T!) There wasn’t much interest in this number during 2020 and 2021 due to the COVID-19 pandemic, and for good reason.
In March 2020, Congress passed the Coronavirus Economic Assistance, Relief, and Security Act – also known as the CARES Act. You probably remember it because of the stimulation tests you received.
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One aspect of the help for students taking out federal student loans was to pause their payments along with resetting the interest rate to 0%. Whew! That was a relief. The pandemic has forced us to focus on more important things than paying off student loans, and that’s a good thing.
However, these payments did not magically disappear – they were paused. The idea was to provide financial relief to borrowers so they could take their mind off student loan payments and instead focus on basic living expenses. It all looked great!
One of President Joe Biden’s first actions upon taking office in 2021 was to extend the student loan repayment moratorium. In August, the US Department of Education announced a definitive extension of the student loan moratorium that continued to suspend federal student loan payments, a 0% interest rate, and moratorium on bad loan collections.
Biden last week extended the student loan moratorium until May 1.
This still looks great! But wait – all of these payment pauses are due to stop on June 1, 2022.
Student loan groups are about to come back to life
In June 2022, the massive drive for student loan pools will come to life again. Students who have federal student loan debt will start receiving invoices in the mail again. Interest rates are going back. The loans that have defaulted since March 13, 2020 will be returned to good standing.
The Student Debt Crisis Center recently released the results of a survey of more than 33,000 student loan borrowers. Here are some of the highlights:
89% of fully functioning student loan borrowers are not financially secure enough to resume student loan payments
27% say a third or more of their income will go towards paying off student loan debt
4% said they could not afford their monthly student loan payments or had defaulted
45% say their financial health is currently poor or very poor
This is a recipe for financial disaster. In fact, there were more than 7.7 million federal student loan borrowers who defaulted on payments at the start of the pandemic. Almost two years later and 93% are still behind. This is not good.
Three tips for getting through the tough days ahead, whether you have student loans or not
Tip #1: Follow 7 Baby Steps
Baby Steps 1 and 2 are essential in these tough financial times. Get $1,000 in the bank ASAP to start your own emergency fund – that’s Baby Step 1. Baby Step 2 is to pay off all your debts, including student loans, from the smallest to the largest. You need to get out of debt to get a bigger margin in your budget.
Tip 2: Motivate and get the budget
A budget is a plan for how you will spend your money each month. Seeing all your bills in one place lets you know how far the money you make will go. If you find that you have a month more than you have money, you need motivation to find additional work to bring in more income during this season.
Tip #3: Be an attorney against student loan debt
Use your frustration and anger over your experiences with student loan debt to help future generations avoid student loan debt. The documentary Borrowed Future exposes the dark side of the student loan industry and reveals how the system was built to work against you. check it out.
Don’t let the pandemic stop you from taking control of your money. It’s your money, after all, and you should be the one in control of where it goes.
After winning $500,000 in scholarships and graduating from her dream school with a bachelor’s and master’s degree, Christina Ellis set out to help students create their own plan for a debt-free education. She is the bestselling author of Confessions of a Scholarship Winner and How to Graduate Without Debt. She is the featured expert on the 2021 documentary Borrowed Future: How Student Loans Are Killing the American Dream. Her work has been featured in many media, such as Fox an Friends, The Katie Couric Show, CBN, USA Today, Reuters, Seventeen and Money. As a symbolic figure, Christina helps thousands of families across the country navigate the complex waters of college funding and graduate debt-free.
This article originally appeared on Fremont News-Messenger: Kristina Ellis: Pandemic Payment Pause will expire June 1