You Have More Time to Pay Off Federal Student Loans
Borrowers who have highlighted the end of their federal student loan waiver programs in September have just received a reprieve. President Donald Trump signed a decree on Saturday extending the interruption in the payment of federal student loans. The new order – which also suspends interest accrual – allows borrowers to stop making payments until December 31st. Created under the $ 2 trillion CARES Act, the current student loan suspension was due to expire on September 30 .
As the country still hasn’t recovered from the pandemic, experts warn that there could be a wave of student loan delinquencies and defaults without further relief. Trump’s new measures apply to most federal loans, but Politico says they still exclude about 9 million federal borrowers with loans owned by private lenders or schools.
Some Democrats and Republicans have already asked for more extensive help. The House of Representatives passed the HEROES Act back in May, calling for a suspension of federal payments until September 2021, but a recent Senate proposal on the HEALTH Act does not offer the same hiatus. Congress is continuing to negotiate these provisions – and until they agree on the final incentive, we won’t know if more help will arrive.
What do you need to do
Although the final pause in payments is automatic, you should double-check your student loan accounts as the original deadline approaches. If you notice an error in the status of a payment, call Loan Support to make the change – and submit a request in writing for your record. Perhaps the combination of relief – between Congress and the executive’s actions – could cause some confusion.
If an additional three-month suspension gives you more wiggle room in your budget, try channeling the extra money into your emergency fund . Experts recommend setting aside living expenses for three to six months for a contingency fund, but if you’re starting from scratch, start at $ 500 to $ 1,000.
While interest rates on savings continue to fall , there are some decent options for storing your money. Once you have mastered your emergency fund, you can move on to paying off the debt at high interest rates.