With the federal student loan freeze nearing its end, Iowa universities and colleges are teaching their students how to proceed with loan payments.
The U.S. Department of Education suspended payment of federal student loans in March 2020. Both former President Donald Trump and President Joe Biden extended their patience several times as the COVID-19 pandemic raged. The freeze will expire on 30 September without further extension.
“While lending institutions are responsible for contacting alumni, Northern Iowa University is working with current students and recent alumni to understand what the end of the freeze means to them,” said Tim Bakula, director of financial aid.
“I think ending the freeze is a major concern for many people who have received loans during this grace period over the past 16 months,” he said. “As a college in this endeavor, we want to help our borrowers understand what opportunities they have and help them avoid default by making appropriate decisions for themselves.”
Iowa residents owe $ 12.8 billion in student loans, while Americans’ total debt exceeds $ 1.7 trillion… Iowa College Aid Assessment 2019 the average post-graduation debt at private nonprofit four-year colleges and universities in Iowa was $ 34,199, and 74% of students graduate with some degree of debt. At state regent universities, it was $ 27,502, with 55% of graduates leaving with debt.
Time to reevaluate
Two and a half months before the end of the moratorium, students still have time to rethink their debt repayment plans, said Elizabeth Kest Sedrel of Iowa College Aid.
“For anyone whose situation has changed, or those who have just taken advantage of the default options, this is a great opportunity to look at the options and decide what makes sense,” she said. “Whether it’s a fixed plan with the same monthly payments, a phased plan that increases payments over time, or an income-based plan, now is a great time to re-evaluate.”
Kest Sedrel said now is the time for recent graduates to check loans and make sure they have the best option before payments begin again in October.
University of Iowa’s director of financial literacy, Kelsey Ryder, said students should take the time to better understand federal loans in general.
“Because they have been suspended for so long, I definitely think that for students who have and did not have repayment, it is important to understand the basics of repaying the loan,” she said. “They need to know their lending institutions and update their contact information with the institution.”
Students who graduate during the pandemic or graduate some time this school year need to know if they have a subsidized or unsubsidized loan in order to plan their next steps, she said.
One of Bakula’s fears is that uninformed students will not be able to repay their loans. He said this is one of the reasons his department continues to educate students about patience.
“Students who have not paid since the start of the pandemic may be more at risk of default simply because they are used to not paying,” he said. “It’s very important to get them back on track.”
US Congressman Robert Scott, Virginia, and Senator Patti Murray, Washington sent a letter to Biden proposing an extension to “early 2022.” Their plan also suggested using “several proven methods of communication with the borrower” so that graduates understand the due dates.
Iowa institutions are working hard to keep their students from getting tangled up in the impending end of abstinence. Ryan Zanting, director of financial aid at Drake University, said his department is hesitant to send reminders if the date changes.
“One of the reasons we are not being more active with students is because we don’t know if it will be extended,” he said. “If the date is rescheduled again, it will only exacerbate the uncertainty and confusion of the students.”
At Northern Iowa University, Bakula said his office continues to educate students about the extensions, but that this could lead to some confusion. The withdrawal of information due to extensions only caused more confusion among students, he said.
Ryder said the University of Iowa’s financial aid department is used to things changing frequently, but it’s difficult to keep students informed without knowing if the freeze suspension will be extended or not.
“Since payments depend on what the staff who serve the student loans decide, we don’t want to create additional confusion about who they pay, when and how much,” she said. “We also don’t want to misinform them about dating.”
While not knowing if the deferral will be extended in the future, the Ministry of Education and the loan servicing agency did not come up with a clear plan for the adaptation of the thousands of recent graduates who will start paying off their loans in October alongside people who have been paying for years – something that , according to Bakula, worries him.
“When you think about the scale of this (situation), it’s not as easy as flipping a switch,” he said. “I think a lot of things are still being decided at the federal level before colleges or students have any additional information, so that too will be something to do over the next few weeks.”