When Do Student Loan Payments Resume
Until recently, the pause on student loan payments was set to end on May 1, 2202. Last week Biden announced an unexpected extension of payments, interest accrual, and collections on most federal student loans through August 31, 2022.
One of the first actions the federal government took after the breakout of the COVID-19 pandemic was to suspend student loan payments. All federal student loans were placed into forbearance, and the interest rate was set to 0% on March 13, 2020.
While payments were originally set to resume later in 2020, theyve been pushed back several times under both the Trump and Biden administrations.
Although September might seem like a long way off, theres no better time to start preparing.
What Are Your Options For Student Loan Forgiveness
If the CARES Act extension expires at the end of August, other options are available. The U.S. Department of Education offers several repayment plans that provide eventual loan forgiveness.
Here are some options to consider:
- Income-driven repayment plans When you sign up for an income-driven repayment plan, your monthly student loan payment is calculated at a percentage of your discretionary income and household size. Each plan provides loan forgiveness if you havent paid off your student loans at the end of the repayment period.
- Public Service Loan Forgiveness The Public Service Loan Forgiveness Program provides full loan forgiveness to borrowers after making 120 qualifying repayments. To qualify for PSLF, you must work full-time for a U.S. federal, state, local, or tribal government or qualifying not-for-profit organization.
- Pay As You Earn The Pay As You Earn Plan is a type of income-driven repayment plan. Under this plan, your monthly payment is set at 10% of your discretionary income, and its never more than the standard 10-year repayment plan. With the PAYE Plan, youll receive loan forgiveness after 20 years.
- Income-Based Repayment The Income-Based Repayment Plan is another IDR plan, and its available to new borrowers as of or after July 1, 2014. Your monthly payment is set at 15% of your discretionary income, and its never more than the standard 10-year repayment plan. The IBR Plan also comes with full loan forgiveness after 20 years.
A Path To Forgiveness
If the president were to use executive action to cancel student debt, he would face legal challenges that Kantrowitz does not expect would not go Bidens way. And Congress has not yet passed legislation for broad loan forgiveness, nor does it seem poised to.
Regulation might be the presidents best bet, says Kantrowitz, whose books include How to Appeal for More Financial Aid.
The federal government offers four income-driven repayment plans, which set loan payments at amounts meant to be affordable to borrowers based on their incomes and family size.
Most people forget these are also loan forgiveness plans, Kantrowitz says. After making qualifying payments for 20 or 25 years, depending on the plan, borrowers can have their remaining debt eliminated. Those who work in public service may qualify for forgiveness after just 10 years of payments.
One of four plans the Income-Contingent Repayment Plan gives the U.S. Department of Education broad regulatory authority such that it could be remade into a means-tested loan forgiveness program, says Kantrowitz.
Means testing, a method of determining eligibility for government assistance, is a way of addressing the concern over helping people who might not need it.
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Widespread Student Loan Forgiveness Seems Unlikely
While there have been some advancements in targeted loan forgiveness in the past year, no widespread student loan cancellation has been enactedâand itâs a debate that will likely continue throughout 2022.
President Biden has consistently supported forgiveness of $10,000 in federal student debt, but other Democratic leaders are pushing for up to $50,000 in forgiveness. Regardless of the proposed amount, thereâs also been much discussion about who actually has the power to enact the measure. Many have called on Biden to pass student loan forgiveness through an executive order, while othersâincluding House Speaker Nancy Pelosiâclaim that only Congress has the power to order such a move.
The Covid-19 pandemic has intensified calls for widespread forgiveness, and as student loan payments are scheduled to resume in May 2022, the debate has reached a fever pitch. While the discussion will surely continue, it seems unlikely that an agreement will be found. No formal proposals have been made and Bidenâs 2022 proposed budget included no mention of widespread forgiveness.
Student Loan Payments Expected To Resume In September
Student loan payments have been paused for over two years. Payments are set to resume on September 1. The deadline has been pushed back before, but there’s no word on whether President Biden will extend it again.
About 800,000 Coloradans still owe on their federal student loans.
According to Student Loan Hero, the average balance is around $34,000.
The average borrower’s payment in the state is about $307 every month.
Recent grads like Callie Glidden have appreciated the break from paying, and the financial security that comes with having extra money in her wallet.
“It’s like $250 a month and I’m not used to paying that,” said Glidden. “I just don’t think we’re necessarily through the break of recovering from what Covid took from us, financially, emotionally, physically,” said Glidden.
The payment pause is scheduled to end as inflation blows up the budgets of borrowers.
“Most of us have taken that money and allocated it elsewhere. Some of it’s simply your normal household expenses like food, gas, childcare,” said Mary Jo Terry, managing partner at Yrefy.
In addition to inflation, student loan interest rates increased on July 1.
Interest hasn’t been accruing on accounts since payments were paused in 2020.
Terry says the latest increase won’t impact current borrowers.
There’s an ongoing discussion in the Biden administration about offering some amount of federal student loan forgiveness. Senators like Elizabeth Warren are urging the president to cancel loans up to $50,000.
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Will Student Loan Payments Be Paused Again
President Biden has not indicated yet whether he will pause student debt payments again, but experts believe it’s a serious possibility.”The situation is that we’re almost 30 days away from the planned resumption and the has been telling servicers to hold off on resumption communications for the last few months,” Scott Buchanan, executive director of the nonprofit Student Loan Servicing Alliance, told The Wall Street Journal. “Maybe the department expects that the White House will yet again kick the can down the road.”
Zack Friedman, CEO of online financial marketplace Mentor, wrote in Forbes that, in theory, “Biden could continue to extend student loan relief through multiple executive orders, creating a student loan payment pause ‘forever.'”Or at least until he leaves office.
With barely a month until student loan payments are set to resume, the Department of Education has told servicers not to send new billing statements.
When Is The Fafsa Deadline
Whether youre a high school senior or already in college, you need to submit the FAFSA every year to receive federal financial aid.
This free application opens every year on Oct. 1 prior to the start of the school year and remains open through the end of the school year .
Still, its important to submit the FAFSA as soon as possible, since some aid is doled out on a first-come-first-served basis. Plus, some states set their own deadlines for priority consideration. Therefore, youll want to beat these deadlines:
- The federal FAFSA deadline
- The states FAFSA deadline
- Your schools FAFSA deadline
Submitting the FAFSA will also reveal your Expected Family Contribution and help colleges put together your financial aid package. By having all this information upfront, youll have an easier time comparing college costs and picking a school.
When does FAFSA open?
The FAFSA opens up every year on Oct. 1 before the start of the school year. For instance, as noted above, the FAFSA will open Oct. 1, 2022 for the 2023-2024 academic year.
When does FAFSA close?
The annual FAFSA deadline falls on June 30. For example, the deadline for the 2022-2023 school year is June 30, 2023, as indicated in the chart above.
When should I apply for the FAFSA?
Its typically a good idea to submit your FAFSA as close to the Oct. 1 opening date as possible. Some financial aid is first come, first served, and applying early can give you the best chance at receiving financial aid.
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Your Money: Student Loan Payments To Resume Sep 1
BATON ROUGE, La. – Student loan payments will resume on September 1.
Keep in mind the deadline has been extended six times since March 2020.
There is no guarantee on whether President Joe Biden will extend it again.
Whether you will need to repay all your college debt is a big debate right now but theres not a lot of controversy about how much debt you should have in the first place.
Just over $22 billion is owed by Louisiana residents, according to EducationData.org.
Some financial aid advisors say a big part of the problem is that students take out more debt than they should for the jobs they get.
College tuition has increased a lot and so has student loan debt. In fact, it has tripled since the 90s and now is around $30,000 on average. Listed below is what you should do if youre looking at colleges now.
Consider how much debt you can manage not how much you can get.
If youre sure of what you want to study, you can consider things like starting salaries for jobs in your field, where you want to live after graduating, and, of course, how expensive the college you want to attend is.
If you know how much you can afford, it will help you decide how you can pay it off.
You might need to look at working while youre in college or trying to find more scholarships or grants that can help.
Remember, if youve already graduated and youre a teacher, nonprofit, or government employee, you could qualify for Public Service Loan Forgiveness.
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Many Federal Student Loan Servicer Contracts Due To Expire
In June 2020, the Department of Education announced that it had signed contracts with several new loan servicers, which would assume control of most of the federal student loan portfolio. Although this means your student loan servicer might change, you probably wont have to worry about it until the end of the student loan moratorium.
But that doesnt mean you should wait. Once repayment does resume, youll want to be ready so that you dont accidentally miss a payment on any of your student loans. This means contacting your server now so that youre aware of any changes.
And if youre not sure who your loan servicer is, consult our guide to finding student loan servicers.
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When Will Federal Student Loan Payments Resume
Assuming the student loan deferment does expire on Aug. 31, youll receive a billing statement or notice at least 21 days before your payment is due. You can contact your student loan servicer to request an estimated payment amount and due date.
To ensure youre prepared for payments to resume, the U.S. Department of Education recommends taking the following steps:
- Update your contact information with your loan servicer and in your StudentAid.gov profile.
- Review or sign up for automatic payments on your servicers website.
- Use the StudentAid.gov Loan Simulator to find a repayment plan that works for your budget.
- Consider enrolling in an income-driven repayment plan.
Build Up Your Emergency Fund
Starting September 2022, student loan borrowers are going to have less disposable income available in their budgets. As a result, less money will be available to put toward other financial goals and financial emergencies that may come up.
Before payments resume, now is the time to make sure you have a healthy emergency fund in place. Wondering how much you should save? Theres some debate among financial experts, but most recommend saving enough to cover 3-6 months of expenses.
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I Was Behind On My Payments What Are My Options
Theres good news for delinquent borrowers, too: You get a fresh start.
You will be current, said Scott Buchanan, executive director of the Student Loan Servicing Alliance, an industry trade group. Their delinquency was removed.
That should remove the pressure for borrowers who were in danger of falling into default, which happens if youre 270 days behind. If you had been delinquent, find out what your payment is expected to be, and if you cannot afford it, consider enrolling in a different repayment plan that will lower your bill.
Consider Which Payment Plan Makes The Most Sense
Many people’s lives have been changed by the pandemic.
If your circumstances look different than they did more than two years ago, it may make sense to review the different student loan payment plans to find the one that best fits your current situation.
The government’s income-driven repayment programs, for instance, cap your monthly bill at a share of your discretionary income. Some payments wind up being as little as $0, and any remaining debt after 20 years or 25 years is supposed to be forgiven. The standard repayment plan, meanwhile, may come with a larger monthly payment, but if you can afford it, it allows you to pay off your debt in just 10 years.
To beat the last-minute rush, contact the loan servicer now if you’ll need a deferment, forbearance or an income-driven repayment plan.Mark Kantrowitzhigher education expert
If you’re unemployed or are dealing with another financial hardship, you’ll have options when payments resume. You can put in a request for an economic hardship or unemployment deferment. Those are the ideal ways to postpone your federal student loan payments, because interest doesn’t accrue under them.
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Biden Is Also Weighing Broad Student Loan Forgiveness
Facing political pressure from the left, President Joe Biden is also considering whether to take executive action to broadly forgive a portion of the balances for 43 million people with outstanding federal student loan debt. He told reporters last week that the end of August remains his timeline for making a decision on whether to take action.
Key Democratic lawmakers, including Senate Majority Leader Chuck Schumer and Massachusetts Sen. Elizabeth Warren, have been calling on Biden to cancel $50,000 per borrower. But Biden has consistently pushed back on canceling that much and has suggested he would support wiping away $10,000 per borrower.
Until now, Biden has taken a more targeted approach to student debt relief. His administration has authorized the cancellation of $26 billion so far more than any other administration largely for borrowers who were defrauded by their for-profit colleges and for permanently disabled borrowers.
He has also temporarily expanded the Public Service Loan Forgiveness program that forgives the debt of government and nonprofit workers after 10 years of payments, and made changes to the income-driven repayment plans, bringing millions of borrowers closer to forgiveness.
But its not entirely clear if the President has the power to broadly cancel student loan debt with an executive action. Biden initially urged Congress to take action to cancel student debt, but Democrats dont have the votes needed to pass a bill doing so.
Get To Know Your Loan Servicer
Three companies that serviced federal student loans Navient, the Pennsylvania Higher Education Assistance Agency, also known as FedLoan, and Granite State all have announced they’ll be ending their relationship with the Education Department.
As a result, around 16 million borrowers will have a different company to deal with by the time payments resume, or not long after, according to Kantrowitz.
For a smooth transition, double-check that your servicer has your current contact information, so you receive all the notices about the upcoming change, Kantrowitz said.
Affected borrowers should get multiple notices about their new servicer, said Scott Buchanan, executive director of the Student Loan Servicing Alliance, a trade group for federal student loan servicers.
If you mistakenly send a payment to your old servicer, the money should be forwarded to your new one, Buchanan said.
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I Am Not Financially Able To Make My Student Loan Payments In 2022 What Can I Do
Paying off student debt can be scary and confusing. If you do not feel financially secure enough to make your student loan payments, talk with you loan provider about repayment plan options. Instead of having a traditional repayment plan, you might qualify for an Income-Driven Repayment Plan, like Pay As You Earn Repayment Income-Based Repayment and Income-Contingent Repayment Plans.
An important note: Before switching from a traditional repayment plan to an income-driven repayment plan, make sure that you understand how making lower payments might affect your loan interest and the length of time that you will need to make payments. It can be helpful to speak with a certified financial counselor or coach before selecting a student loan repayment plan.
How Borrowers Can Prepare
Its been more than two years since mostborrowers have had to make payments on their federal student loans.
When the payments finally resume, borrowers should still be in the same payment plan as they were before the pandemic and the amount due should, for most people, be the same.
But if a borrower is worried about affording themonthly payment, he or she can call the loan servicer now to enroll in a different payment plan. Those who may have lost income over the past two years may be eligible for a lower monthly payment than they were before the pandemic.
Servicers will also request that borrowers confirm that they want to continue to have their payments automatically debited from their accounts. If a borrower does not confirm that he or she wants those to resume, auto debit will not turn on once payments resume.
Buchanan is encouraging borrowers who have questions to reach out to their loan servicers today, rather than wait until payments resume.
If they wait to call until the day payments actually resume, they may be on hold for a very long time, Buchanan said.
Loans serviced by Navient were transferred to Aidvantage, and loans that were serviced by Granite State were transferred to Edfinancial Services. Borrowers who have been serviced by FedLoan and are seeking debt relief from the Public Service Loan Forgiveness program are currently being transferred tothe Missouri Higher Education Loan Authority, known as MOHELA.
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