Student loan forbearance extension: What borrowers should know
The White House once again extended the federal student loan payment pause through May 2022, which means borrowers have 90 additional days to prepare for repayment. (iStock)
The payment pause on federal student loans has been extended until May 1, 2022, President Joe Biden announced Wednesday. This decision comes after calls from prominent Democrat lawmakers like Sen. Elizabeth Warren and Senate Majority Leader Chuck Schumer urging the president to postpone repayment amid economic uncertainty surrounding the omicron variant.
But with millions of loans being transferred to new servicers, there are a few things federal student loan borrowers should know. Keep reading to learn more about the return of federal student loan payments, including your alternative debt repayment options like refinancing.
Browse interest rates from student loan refinancing lenders in the table below, and visit Credible to see offers tailored to you for free without impacting your credit score.
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How is the student loan payment restart going to work?
When federal student loan payments resume in May, the process will work similarly to how it did before the COVID-19 forbearance period. Still, there are a few things you should do to make sure you're prepared:
Update your contact information. If you haven't yet received communications from the Department of Education about payments restarting, make sure your phone number, email and address are up-to-date with your loan servicer. That way, you don't miss any important updates about your loans.
Opt back into an automatic repayment plan. Student loan borrowers who were enrolled in automatic payments before the pandemic forbearance period will need to opt in again through their student loan servicer or risk missing their first loan payment in February.
Determine your loan servicer. Millions of student loan borrowers have had their loans automatically transferred to a new student loan servicer after several large companies have exited the industry (Navient, FedLoan Servicing and Granite State Management & Resources, to name a few).
If your loans have been transferred to a new servicer, your repayment terms — including monthly payment amount, payment due date, remaining loan balance and interest rate — will be the same as they were with your old servicer. Impacted borrowers should have already received an email from the Education Department.
Student borrowers who are unhappy with their current repayment conditions have a few options for locking in better terms, including refinancing through a private lender. Visit Credible to compare student loan refinance offers across multiple lenders without impacting your credit score to see if you can qualify for a lower interest rate.
Keep in mind that refinancing your federal student loans into a private loan will make you ineligible for select government benefits, such as administrative forbearance and federal debt forgiveness programs.
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3 ways to lock in better student loan repayment terms
Some consumers may be looking for ways to reduce the burden of student loan debt before May. A recent survey found that 89% of fully employed borrowers aren't financially prepared to resume payments. Here are a few ways to make repayment easier on your finances:
- Enroll in income-driven repayment (IDR). An IDR plan limits your federal student loan payments to 10-20% of your monthly discretionary income, depending on the type of loans you have. You can sign up for income-driven repayment on the Federal Student Aid (FSA) website.
- Apply for additional federal forbearance. If you just need a bit more time to get your finances back in order before making payment on your loans, you may be eligible for up to 36 months of additional federal forbearance through unemployment deferment or economic hardship deferment.
- Reduce your monthly payments with student loan refinancing. It may be possible to save money on your student loan payment plan by locking in a lower interest rate. Well-qualified borrowers who refinanced to a longer-term loan were able to lower their payments by more than $250 on average, according to a Credible analysis.
Use a student loan payment calculator to determine how much you can save by refinancing. To learn more about student loans, get in touch with a knowledgeable loan officer at Credible.
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