Federal student loan will expire soon

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A group of alumni sit alone away from a large alumni crowd during the University of Iowa Alumni Celebration at Kinnick Stadium in Iowa City on Sunday, May 16, 2021. (Andy Abeyta / The Gazette)

The federal student loan freeze has given respite to those suffering from the economic fallout from the pandemic, but those loans are soon due again for repayment.

More than 40 million federal loan holders will be required to make monthly payments again starting October 1, ending the payment freeze set back in March 2020.

Across the country, Americans have over $ 1.7 trillion in student loan debt, more than double the amount in credit card debt.

Before the pandemic, it was clear that Americans could not meet their student debt obligations.

Severely overdue loans — that is, more than 90 days overdue — exceeded $ 135 billion before the freeze — a higher rate than most types of debt.

The New York Fed warned that the real number of bankrupt loans is likely to double as many borrowers have not yet reached the stage where they should start making payments.

Smaller student debt among Iowa residents compared to the rest of the US

In Iowa, borrowers generally have lower student debt than in other parts of the country. Average debt per capita on student loan in Iowa was over $ 5,000, according to Iowa College Aid.

More than half of first year students in Iowa take federal student loans.

Compared to the national rate, Iowa colleges and universities often have lower default rates national average 9 percentaccording to the Federal Bureau of Student Aid, US Department of Education.

At Iowa public universities, the default rate in 2017 ranged from 3.3 percent to 3.6 percent, according to the US Department of Education.

Financial aid directors at Iowa universities say the problem with renewed payments will be to communicate that they are coming again.

Roberta Johnson, director of financial aid at the University of Iowa, said there will be a huge effort on their part for lending institutions to educate students that the freeze is ending.

“There will be students who are out of the habit of paying student loans,” she said.

“Making sure these people know that their moratorium is ending and that they need to start paying on the loan or they will face negative consequences as a result is a big challenge.”

Recent graduates should check when loans are due

Kelsey Ryder, director of financial literacy at the University of Iowa, said graduates who need to start making loans again should contact their loan providers.

“Some of our students who just graduated last May or during the pandemic may never have paid for it,” Ryder said. “So they definitely want to make sure they know who it is.”

Students receive a six-month grace period after graduation, during which they are not required to pay loans when drawing up postgraduate plans.

Students who have ended their grace period at any time during the freeze will also be required to start making payments on October 1st.

University financial aid offices can help graduates with loans contact their loan provider and answer questions, but loan payments are made directly to the service provider.

Tim Bakula, director of financial aid at the University of Northern Iowa, said UNI’s financial aid department plans to create some sort of email campaign that will serve as a friendly reminder.

“There are some people who still cannot find a job or find a job that would allow them to make payments,” Bakula said.

“These are really the challenges that we as an institution would have – ensuring that they are not going to end up defaulting on their loans or being foreclosed on their loans.”

What if you are unable to make payments?

For students who are short on loan payments, income-based payment plans are usually the best option, Bakul said.

“With regard to giving students the opportunity to reconcile their current employment status with the size of their payment,” he said.

“If someone is unemployed, they will be able to register for an income-based enrollment plan and will likely have a $ 0 monthly payment that will satisfy their requirements.”

With the US economy still short of 7.6 million jobs to pre-pandemic levels, recent graduates may struggle to find jobs to pay off their loans, or work in the field in which they earned their degree.

ISU’s Johnson said how quickly recent graduates can find jobs that will allow them to start paying off their loans depends a lot on their major and the type of career they are looking for.

“We know, both in our state and in others, that there are areas in which people are looking for employees are in short supply,” she said.

“But it should be a good match. Is this the kind of job that a recent college graduate wants to make as a career, or is it a stopgap for them until they find the career job they want? “

Ryder said that UI financial aid has not yet received many questions about the upcoming chargebacks.

“I wouldn’t be surprised if we get these questions when it really starts. But now we haven’t heard about it from a lot of students, ”Ryder said.

“I think maybe they just don’t think about it yet, because definitely when they stopped, we really had questions.”

T. Ann Cleary Walkway leads to the Pentacrest and Old Capitol on the University of Iowa campus in Iowa City on Wednesday, March 31, 2021 (Liz Martin / The Gazette)

Graduates sit in caps and gowns as they await the start of the University of Iowa alumni celebrations at Kinnick Stadium in Iowa City on Sunday, May 16, 2021. (Andy Abeyta / The Gazette)

Alumni wave to patients and staff at the University of Iowa Family Children’s Hospital during the University of Iowa Alumni Celebration at Kinnick Stadium in Iowa City on Sunday, May 16, 2021. (Andy Abeyta / The Gazette)

Bloomberg News contributed to this report.

Comments: (319) 368-8827; rylee.wilson@thegazette.com



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