Student loans are due in 60 days. Are you ready?

Student loans are due from 60 days.

Here’s what you need to know.

Student loans

Federal student loan repayments are expected to resume from 60 days. President Joe Biden extended temporary student loan relief through May 1, 2022, which was his third extension. Student borrowers should prepare now for the end of the student loan payment pause. Here’s how to prepare.

What does the end of student loan relief mean?

Temporary student loan relief from the Cares Act — the $2 trillion stimulus package Congress passed in March 2020 — has been extended five times by Biden and President Donald Trump. (Will student loan repayments be postponed until 2023?). When this student loan relief ends in 60 days, student borrowers will experience several changes, including:

  • federal student loan repayments will be due monthly;
  • interest on federal student loans will begin to accrue; and
  • student loans in default are subject to debt collection such as wage garnishment.

As of March 2020, student loan borrowers have not been required to make federal student loan payments, while interest rates on federal student loans are 0%.

What will be my new interest rate on my student loan?

When student loan payments resume, you may be wondering what your new student loan interest rate will be. If you have federal student loans, you most likely have a fixed interest rate. This means that your interest rate will remain the same for the duration of your student loan. Therefore, the interest rate you had before March 2020 will be the interest rate you had in May. If you have older federal student loans, you may have a variable interest rate. This means that your interest rate is subject to change during the term of your loan. Your new interest rate starting in May will be based on current market rates.

(What to do if you don’t qualify for student loan forgiveness)

Are private student loans impacted?

The restart of student loan repayments from May only affects federal student loans. Private student loans were not included in federal student loan relief. Therefore, you must continue to pay private student loans in the normal course.

(Do you qualify for $5 billion in student loan forgiveness?)

How does student loan relief affect repayment based on income?

During the Covid-19 pandemic, your income, family size, state of residence, or all three may have changed. If you are enrolled in an income-based repayment plan such as IBR, PAYE, REPAYE, or ICR, now is a good time to update this information with your student loan officer. These factors can impact your monthly payment for your federal student loans.

(Here are 6 major changes to student loan forgiveness)

What is the impact of student loan relief on student loan forgiveness?

The end of student loan relief does not mean the end of student loan forgiveness. During student loan relief, student borrowers were able to count federal student loan defaults as if they had made their student loan payments. For a student borrower seeking utility loan forgiveness, for example, that borrower can “count” nearly two years of nonpayment toward the 120 monthly payment requirement. While this benefit is ending, student borrowers can “count” more payments that were previously ineligible. Student loan borrowers must complete a limited waiver with the U.S. Department of Education to count past student loan payments toward public service loan forgiveness, which may help them get loans forgiven more quickly students. Since becoming president, Biden has forgiven more than $15 billion in student loans.

Should I Refinance Student Loans Now?

If you want a lower interest rate, a lower monthly payment, or both, refinancing a student loan can be a smart financial decision. You get federal and private student loan refinance as well as undergraduate and graduate student loans. When you refinance student loans, you can choose a fixed or variable interest rate and a student loan repayment term between 5 and 20 years.

This student loan refinance calculator shows you how much money you can save when you refinance student loans.

If you’re looking for student loan forgiveness, income-contingent repayment, or other federal benefits, you should only refinance private student loans. Why? When you refinance federal student loans, they become private student loans and will not be eligible for these federal programs. (Student loan refinance rates have gotten ridiculously cheap). That said, getting a lower interest rate on your federal student loans may make more sense financially for you depending on your particular situation. Only you can decide whether maintaining federal benefits or getting a lower interest rate is better for you financially.

Student Loans: Related Reading

Student loan refinance rates have gotten ridiculously low

3 ways to get student loan forgiveness now

Will student loan repayments be postponed until 2023?

If Biden cancels student loans, it will happen next

About Judith J. George

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