Student loans are on hold, but here’s what you need to do.
Here’s what you need to know – and what it means for your student loans.
Student loans are on hold, but you might be wondering what this means and what, if anything, you should do. Let’s make it easy for you.
Student loans are on hold, but what does that mean?
President Joe Biden suspended federal student loan payments for an additional 90 days until May 1, 2022 (Here’s why Biden extended student loan relief). This is the continuation of the temporary student loan forbearance that Congress included as student loan relief in the Cares Act in March 2020. President Donald Trump has extended this student loan relief twice until January 31, 2021, while Biden extended that student loan relief three times. . It is important to note that this temporary student loan forbearance only applies to federal student loans (not private student loans). Until May 1, 2022, if you have federal student loans, you are not required to make a federal student loan payment. There will also be no new interest accrued on your federal student loans and no collection of defaulted student loans.
Should I apply for student loan relief?
No, you don’t have to apply for this student loan relief. This is an automatic student loan relief for student loan borrowers with federal student loans. It is also the same student loan relief that has been available since March 2020.
Do you have to pay your student loans?
You may be wondering if you should pay off your student loans during this time. With federal student loan payments, you have two options. First, there was nothing you could do and start making federal student loan payments again in May. Second, you can make one or more optional payments for your student loan at any time before the end of the student loan relief. Why would you make a student loan repayment if you don’t have to? The answer: you can reduce your principal student loan balance, which could save you a lot of money. Since there is no new interest accrued on your federal student loans, your student loan payments will first be used to pay off any unpaid interest. After you’ve paid off your student loan interest, every dollar you pay on your student loan will directly reduce your student loan balance. Student loan repayments of any amount during student loan relief can help save you money. Although student loan relief ends on May 1, there may be more student loan relief. (More student loan relief might look like this).
What about private student loans?
It is important to note that this student loan relief does not apply to private student loans, so you must continue to make private student loan payments. If you’re having trouble making private student loan repayments, contact your student loan manager to discuss student loan repayment options.
Will your student loans be canceled?
The question for student loan borrowers is whether student loans will be canceled. (Biden extended student loan relief, but advocates really want student loan cancellation). This student loan relief following the Covid-19 pandemic is not directly related to the cancellation of student loans. Rather, this student loan relief is focused on the temporary forbearance of student loans, which focuses on the break in federal student loan payments. If there is a student loan cancellation, the most likely path is for Congress to pass large-scale student loan cancellation legislation. Alternatively, some argue that Biden has the executive power to cancel student loans for all student loan borrowers. However, Biden said he doesn’t think he has such authority or plans to cancel student loans for all student loan borrowers. It is possible that Biden will enact a full-scale student loan cancellation, although any action by the executive may be challenged in court. Alternatively, Biden may not enact large-scale student loan cancellations and end student loan relief on May 1 as scheduled. (How to qualify for the automatic student loan exemption).
What to do with FFELP loans?
If you have FFELP student loans, these are federal student loans issued before 2010 that were guaranteed by the federal government but issued by banks and financial institutions. Many FFELP borrowers have been frustrated because they have been excluded from student loan relief. One option for these student loan borrowers is to consolidate the FFELP loans into a direct consolidation loan. This will convert your FFELP loans into a direct loan, which may qualify for this student loan relief. Contact your student loan manager or the US Department of Education for details.
Should I Refinance Student Loans?
If you want to save money, get a lower interest rate, and pay off your student loans faster, then yes, you should consider student loan refinancing. Student loan refinance rates are ridiculously low, starting at 1.74%.
This student loan refinance calculator shows you how much money you can save when you refinance student loans.
For example, suppose you have $ 80,000 in student loans, an 8% interest rate, and a 10-year repayment period. If you refinance student loans with an interest rate of 3% and a 10-year repayment period, you could save $ 198 each month and $ 23,776 in total. With student loan refinancing, you can refinance federal loans, private loans, or both. You can also choose a fixed or variable interest rate as well as a student loan repayment term of 5 to 20 years.
If you are refinancing, it’s not for everyone. You will need to be employed or have a signed job offer, have a credit score of at least 650, a stable monthly income, and enough monthly cash flow to pay off debt and living expenses. You may not want to refinance federal loans during student loan relief and refinance private student loans instead. You also won’t want to refinance federal loans if you need a federal repayment program such as a student loan forgiveness or income-oriented loan, for example, because the resulting loan will be a private loan. However, the borrowers have focused on the economics of refinancing private and federal loans, including student loan relief.
Make sure you understand all of your student loan repayment options. From doing nothing to getting a lower interest rate, you have several choices. Here are some popular ways to pay off student loans faster: