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During the height of the pandemic, Congress passed legislation to provide some financial relief to struggling Americans — including those facing federal student loan payments.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act suspended payments on federal student loans, set the interest rate on those loans to zero, and suspended collections on loans in default. President Joe Biden has now extended those provisions until May 1, 2022.
Unless the government acts to extend the relief again, you’ll need to resume paying your federal student loans on Feb. 1.
When does COVID student loan forbearance end?
It’s important to note that forbearance was only for federal student loans owned by the Department of Education — subsidized and unsubsidized Direct Student Loans and Federal Family Education Loans — not for private student loans.
Right now you can expect student loan forbearance to end on May 1, 2022. If your payments were auto-debited before forbearance, those debits will resume. Look for a notice or billing statement from your loan servicer in the next few months to find out your specific due date.
Although President Biden extended relief, it’s probably a good idea to prepare to resume your monthly student loan payments.
You can compare student loan rates and refinancing options with Credible.
How will the end of forbearance affect student loans?
The months of forbearance could affect the costs of your federal student loans and how you’ll repay them once payments resume. Contacting your loan servicer now could help you understand how things will work when your payments begin again.
Let’s look at some key questions you may have.
Will my payment amount change?
Your payment amount may change when the repayment period begins, especially if you’re on a traditional repayment plan like Standard, Graduated, or Extended Repayment plans. Your loan servicer may recalculate your payments based on how much you still owe in principal and interest. .
If you’re on an Income-Driven Repayment Plan (IDR), your payment amount will likely be the same, unless you’ve recertified since your payments were suspended.
Will it now take longer to pay off my loans?
Yes — if you’re on a Standard, Graduated, or Extended repayment plan, your payoff date will be extended. But you’ll still make the same total number of monthly payments.
If you’re on an income-driven repayment plan, the months your loans were in forbearance won’t delay your progress. That’s because the suspended payments have still counted toward your forgiveness. But if your income or the size of your family has changed during the suspension period, those factors could affect your repayment plan. It’s a good idea to talk to your loan servicer to get more insight.
What to do before student loan payments resume
For many borrowers, student loan forbearance meant being able to keep more money during the months when the pandemic affected their income. Now that you’ll likely have to begin making payments again starting Feb. 1, 2022, you’ll want to take steps now to put yourself in the best possible position to deal with the impact of forbearance ending. Here are some tips that could help.
Get organized
Try these organizational tactics so that when payments come due, you’re not caught off guard.
- Log into your StudentAid.gov profile and on your loan servicer’s website to update your contact information and check your loan balance. You can also crunch numbers to see what your monthly payments will be and if they changed.
- Reach out to your loan servicer to discuss how you’ll resume your student loan payments.
- Check out the federal government’s Loan Simulator to find a repayment plan that works for you or if you should consolidate your federal student loans.
Pay down other debts
Once the student loan payment suspension ends, you’ll likely receive a notice or billing statement at least 21 days before your payment is due. Before then, you can take steps to free up more money to put toward your student loans.
- Pay down or pay off high-interest credit cards.
- Pay down any other loans or debts.
- Work on your credit, in case you decide to refinance into private student loans.
- Learn about IDR repayment plans, to see if one is right for you.
Adjust your budget
Now that student loan forgiveness is ending, it’s time to readjust your budget to include student loan payments.
- Trim any extra spending on nonessentials to allow yourself more money to put toward your loans.
- Continue building your emergency fund, so that if a financial crisis happens again, you’ll have savings to help you continue paying all your bills.
Contribute to your retirement accounts, because paying yourself first is critical.
Boost your income
Many people saw drops in their income as a result of COVID-19. You may have lost a job or experienced a layoff. If you’re already back to work, you can still take additional steps to boost your income so you can pay your student loans without hardship.
- Take on another part-time job.
- Drive for Uber or Lyft.
- Sell items you no longer need or use.
- Start a side hustle, like graphic design or web development.
- Rent out your house (or an extra room) when you’re away on vacation.
With Credible, you can compare student loan refinance rates quickly and easily.
What should I do if I can’t afford my student loan payments?
If you’ve crunched the numbers and concluded your student loan payments will be unmanageable, there are ways to deal with the situation. IDR plans can lower your monthly payment, maybe even as low as $0. That’s because the amount of your payment is closely tied to 10% to 15% of your income.
Income-driven repayment (IDR) plans
Four types of income-driven repayment plans are available.
- Income-Based Repayment (IBR): With an IBR plan, your monthly payments are based on two factors: your discretionary income and the date you took out your loan.
- Pay As You Earn (PAYE): Your monthly payments are 10% of your discretionary income, and you must meet the Department of Education’s “new borrower” requirement.
- Revised Pay As You Earn (REPAYE): Your discretionary income also plays a part, but repayment is 20 years for undergraduate study and 25 years for graduate study.
- Income-Contingent Repayment: This is the only IDR available for Parent PLUS Loan borrowers.
If you want to change your repayment plan, take these steps.
- Enter your loan information into the Loan Simulator to see how much you might save by changing your current plan.
- Contact your servicer. They can answer any questions you have.
- Complete any paperwork or submit an application, which you can find at studentaid.gov.
- Applications can take months to process, so make sure to check payment due dates so you don’t fall behind.
- Update autopay, as required.
Refinancing into a private student loan
Refinancing your government student loans into private loans can save you money in the long run. You might qualify for a better interest rate, which can mean more manageable monthly payments. Keep in mind that you can’t refinance federal student loans into new federal loans.
You can only consolidate your federal student loans into a single new federal student loan, which might not actually lower your payments or your interest rate. If you decide to refinance to private student loans, you’ll want to explore your options.
- Figure out which student loans you can refinance.
- Decide which student loans you want to refinance.
- Compare several lenders to find the best rates.
- Fill out refinancing applications — it’s free.
- Until you’re approved, keep making your payments on your current loans.
- When you’re approved, sign and finalize your new loan.
Credible makes it easy to compare student loan refinance rates from multiple lenders.
Explore loan forgiveness
With loan forgiveness, you may get help with repayment or you may not have to pay back some — or any — of your loans at all. But you must meet very specific requirements to qualify. You can’t apply for forgiveness of your entire loan amount, and you must prove you’ve made the required number of monthly payments. Keep in mind that your loan must also be in the Direct Loan program.
Here are the qualifications for loan forgiveness:
- Public Service Loan Forgiveness: PSLF plans are offered to full-time employees of the U.S. government and nonprofit organizations. After 120 qualifying payments, you’re off the hook for the rest of your loans.
- Teacher Loan Forgiveness: As a thank you to teachers for their service, this program forgives up to $17,500 in loans.
- Nurse Corps Loan Repayment Program: You must work full-time as a nurse in an accredited facility and must have received a nursing education.
- Military student loan forgiveness: Each branch of the military may offer loan forgiveness programs for military personnel.
- State-sponsored repayment programs: Your state may offer repayment programs based on where you work. These programs provide benefits over and above those at the federal level.
To learn more, visit Federal Student Aid.
Will the student loan payment pause be extended?
Student loan forbearance has been in effect for more than 16 months. On Friday, Aug. 6, 2021, President Biden chose to extend the freeze (which was scheduled to end Sept. 2021, then Jan. 31, 2022) on student loan payments until May 1, 2022.
Biden’s long-term plans also call for canceling up to $10,000 in student loan debt per borrower, tuition-free public and community college, and more.
But being proactive and having a plan for how you’ll pay off your student loans once forbearance ends could help you mitigate any negative effects of resuming your loan payments.