How to Plan for Ending a Student Loan Deferral
The good news is that the federal student loan payment freeze has been extended until February 1, giving borrowers more breathing room. However, since additional student debt relief beyond this is uncertain , you should start scheduling these payments again starting in February.
Resume payments
As long as you are set to automatic transfers, your payments will continue where you left off. However, just in case, contact your loan agent and confirm the due date and your contact and banking information is up-to-date. (Note that the loan freeze does not apply to private student loans .)
You don’t need to start making payments before February, but that doesn’t mean you can’t. You can pay off your student loan now and save a few dollars in the long run by paying off the principal at no interest.
What if you can’t pay?
If you have lost income or lost your job in the past few months, ask your supplier about other deferral or abstinence options, which include:
- Unemployment deferral : If you cannot find a job, you may be eligible for a deferral in six-month increments for up to three years. This program also covers your interest on subsidized student loans , but not on unsubsidized loans.
- Economic hardship deferral: This program allows you to suspend payments on your federal student loan for up to three years, during which time the government will cover the interest on subsidized student loans. To be eligible, you must receive government or state aid, earn below 150% of the poverty line, and work at least 30 hours a week.
- Abstinence: If you are not eligible for a deferral due to economic hardship, you can apply for a federal deferral or explore private deferral options with your lender. Federal abstinence can last up to three years, while private abstinence will be much less, perhaps as little as two to three months at a time. Unlike the deferral, the government will not cover the interest on your loan.
- Income- driven repayment plans: Income- driven repayment plans can provide affordable monthly payments to borrowers based on their taxable income and family size (if you earn less than 150% of the poverty line, payments are made under your federal income may be zero.). If you are already using an IDR plan and are making less money now, ask your lender to re-verify your income before the IDR goes back into effect.
For more information on these options (and other special deferrals), click here .
Is there more debt relief expected for students?
President-elect Joe Biden could extend the suspension of monthly federal loan payments to students once he takes office in 2021 through a decree , but he also did not take over that option . And the law on debt forgiveness is unlikely to be passed if the Republicans maintain their majority in the Senate (which depends on the results of the second round of elections in Georgia in January).
General purpose checks are also a controversial part of the ongoing negotiations on the emergency bill, and it is not clear yet if this will be part of any legislation, and if so, by what amount. Therefore, it is prudent to plan a worst-case scenario and assume that student loan payments will indeed resume in February.
Finally, if you have had student debt for many years, you may be eligible or currently participate in the Loan Forgiveness Program, which has also been frozen under the CARES Act. For more information, check out this Lifehacker post to see what options you have while debt repayment is on hold.