For 42.9 million student loan borrowers, 18 months passed without repayment. It ends in October – ready or not.
The pause in paying off the interest-free federal student loan, known as the deferral, has been extended three times after it originally went into effect in March 2020 to help mitigate the financial shock that many borrowers have experienced as a result of the pandemic.
But with payments due to resume in a few months, the service companies — the companies that manage student loan payments — are already taking thousands of calls a day from borrowers. looking for student loan help, according to Scott Buchanan, executive director of the Student Loan Service Alliance, a not-for-profit trade organization serving those who serve student loans.
Both the service personnel and the borrowers of the loan do not have time to prepare for repayment.
Although Education Minister Miguel Cardona indicated that it is “not impossible” to extend the grace period after September 30 ). days prior to their exact billing date).
Talk to your service staff now
Service providers expect that the demand for help from borrowers will increase and may find it difficult to cope with it. The repayment system has never been shut down before, so no one is sure what a simultaneous restart would look like for 42.9 million people.
“We have no direction from the department. [of Education] about what the renewal strategy will look like, ”says Buchanan. “We are at the time when these plans should be brought to the attention; he cannot wait. “
Richard Cordray, recently appointed head of the Department of Education’s federal student aid office, told The Washington Post on June 11 that the renewal of payments is “a very difficult situation,” and said the office plans to provide more information to service providers soon. He also said the department plans to hold service providers accountable by setting stringent performance criteria.
“Despite the uncertainty, if you’re worried about your ability to make payments, there’s nothing wrong with contacting your service agent now to get out of the rush,” Buchanan says. Ask about the best payment management options based on your situation.
If you do not know who your service personnel are, please log into your My federal student aid account to find out. To ensure you don’t miss any notices, make sure your contact information is up to date on your lending institution’s website and on your StudentAid.gov profile.
Know your repayment options
“Your options are not ‘pay or default,’” says Megan Koval, vice president of policy and federal relations with the National Association of Student Financial Aid Administrators. “There are intermediate options for reducing payments. Nobody, including the federal government, wants you to default. “
The default occurs after about nine months of a federal loan delay. This can lead to a deterioration in your credit rating, withholding wages, withholding tax refunds and other financial burdens.
- If Payments Are Difficult: Participating in an income-driven payment plan sets payments as a portion of your income, which can be $ 0 if you are unemployed or part-time. Or, you can suspend payments (with interest collection) using unemployment deferral or deferral.
- If you are late in payment before the pause: your credits will be repaid in good standing. Making your monthly payments on time will help you maintain this status. But if you think you might be missing out on a payment or can’t afford payments at all, ask your support staff about enrolling in an income-driven plan.
- If you defaulted before the hiatus: Contact the loan holder or the Education Department’s default settlement team to find out how to begin loan recovery and restore a good reputation.
Find a legitimate resource
Service providers may be your first point of contact, but not necessarily the last. You may have other needs that your service staff are not meeting, such as financial difficulties besides a student loan or legal advice.
Non-cash borrowers can get free legal student loan assistance from organizations such as The Institute of Student Loan Advisors. Other student loan assistance such as a loan counselor or lawyer will charge a fee. You can find reputable credit counselors at organizations such as the National Credit Counseling Fund.
Financial planners can also help, but it is best to look for someone with experience with student loans, such as a certified student loan specialist.
You can get legal assistance, including advice on debt settlement and bankruptcy, from lawyers who specialize in student loans, or legal services in your state, as outlined in National Center for Consumer Law…
If your problem is with service personnel, contact the Federal Student Loan Ombudsman Group, which resolves federal student aid disputes. you also can file a complaint with the Federal Student Aid Feedback Center or the Consumer Financial Protection Bureau.
Legitimate student loan aid organizations will not seek you out with offers of debt resolution through unsolicited text messages, emails, or phone calls. Most importantly, you don’t have to pay anyone to apply for debt consolidation, enter into an income-based repayment plan, or apply for a government service loan forgiveness.
“The hard and fast rule is that when applying for [consolidation and repayment] the programs are free, ”says Kyra Taylor, a staff attorney specializing in student loans at the National Center for Consumer Law. “I think when people understand what they can do for free, it becomes easier for them to detect fraud.”
And don’t fall for any company that promises to forgive your student loans or wait for the government to do so – so far, no executive action by President Joe Biden or Congressional legislation has happened.