Longer student loan forbearance is needed, 40% of borrowers say in survey
The payment suspension on federal student loans was part of the greater push for COVID-19 emergency relief, but payments restart in just a few short months. (iStock)
Forty percent of borrowers with student loan debt believe the Biden administration should have extended the student loan forbearance period beyond January 2022, according to a new survey from financial services company D.A. Davidson & Co.
"Our survey uncovered a resounding need to get the student debt crisis in check and address critical conversations that need to be had between families and advisors to minimize the repercussions from student loans."
The vast majority of those surveyed (81%) also believe that America has a student debt problem, and 55% are in favor of some sort of wide-scale student loan forgiveness from the federal government.
But with federal loan payments resuming in just a few months – and no plan for widespread debt cancellation in sight – borrowers need to start thinking about their student loan repayment plans. Keep reading to learn how to prepare your finances for the end of federal forbearance, and consider your options like alternative debt forgiveness programs and student loan refinancing.
If you decide to refinance your student loans, be sure to shop around for the lowest interest rate possible for your situation. You can compare rates across multiple private lenders without impacting your credit score on Credible.
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When does student loan forbearance end?
The payment pause on federal student loans expires on January 31, 2022. Student loan servicers will resume collecting student loan payments beginning in February 2022.
It's important that you check to see if you have automatic payments set up for your student loans, so you're not caught off-guard when your student loan payment is deducted from your account.
Will student loan forbearance be extended again?
The Department of Education (DOE) announced in August that this would be the "final extension" of the COVID-19 emergency forbearance period. The most recent extension was the fifth time the government postponed the federal student loan payment pause since March 2020, when the Trump administration first issued administrative forbearance.
This federal student loan forbearance extension also gives the Education Department time to respond to recent student loan servicer changes. Two large servicers — FedLoan Servicing and Granite State Management & Resources — are ending their federal contracts at the end of the year, which means the DOE has to reassign the loans of about 10 million borrowers.
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How to repay student loans when forbearance expires
Student loan payments are a significant monthly commitment that can skew your budget and hold you back from achieving life's financial milestones like buying a home. But the consequences of not repaying your student loans are plentiful: your credit will take a hit and you may even be charged late fees, all while interest continues to accrue.
Thankfully, you have options if you're not ready for student loan repayment in February. Here are a few moves to consider.
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Lower your monthly payments by refinancing
Student loan refinance rates are still near historic lows, which makes it a great time to snag a lower rate on your college debt. Refinancing can help you lower your monthly payments, pay off your debt faster and even save money over the life of the loan.
Borrowers who switched to a longer-term loan on Credible were able to shave more than $250 off their student loan payments, all without adding to the total cost of the loan.
There is one caveat, though: If you refinance your federal student loans into a private loan, you'll lose federal benefits like administrative forbearance, income-driven repayment plans (IDR plans) and even possible student loan forgiveness measures in the future. But you have nothing to lose by refinancing your private student loans to a lower rate.
Browse current student loan rates in the table below, and visit Credible to see your estimated interest rate without impacting your credit score.
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Apply for additional forbearance
Federal student loan borrowers can apply for up to 36 months of additional forbearance once the moratorium on student loan payments expires. Simply fill out an economic hardship deferment request or an unemployment deferment request on the office of Federal Student Aid (FSA) website.
If you can't make payments on your private loans, talk to your lender about enrolling in forbearance. Private lenders have their own policies on who qualifies for forbearance and how the forbearance works, so keep in mind that interest may accrue during your forbearance period.
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Research student loan forgiveness programs
While wide-reaching student loan debt cancellation may still be beyond reach, there are a few other student debt forgiveness programs:
- Public Service Loan Forgiveness (PSLF): Public school teachers, military personnel, law enforcement officers and other civil servants may qualify to have the remainder of their student loan debt discharged after making 120 qualifying payments.
- Teacher Loan Forgiveness Program: Qualified educators who teach full-time for five years at a low-income school may qualify for up to $17,500 in federal student loan forgiveness.
- Closed school discharge: You may be eligible to have your student loans forgiven if your school closes while you're enrolled or soon after you withdraw.
- Borrower defense to repayment: If your school misled you or engaged in other misconduct, you may be eligible to have some or all of your federal student loan debt discharged.
Still not sure what to do with your student loan debt? Get in touch with an experienced loan officer at Credible to discuss your options for student loan repayment.
Have a finance-related question, but don't know who to ask? Email The Credible Money Expert at moneyexpert@credible.com and your question might be answered by Credible in our Money Expert column.