The government suspended payments on federal student loans during the pandemic, but borrowers must start paying again in September. Both they and the infrastructure to support payments may not be ready.
Why is it important: Americans owe a whopping $ 1.6 trillion in student loans. The respite has brought huge relief of about $ 14 billion a quarter to more than 40 million borrowers.
- The growing student loan debt was a looming “pre-crisis crisis.” Highly indebted graduates find it difficult to buy a house or even create a financial safety net.
Student loan problem the problem isn’t just the student loan. “Anyone who is struggling to pay off their student loans is likely not to Only struggling there, “says Sarah Sattelmeyer, project manager for the higher education program at think tank New America.
Threat level: According to Mark Kantrowitz, author of the book Mark Kantrowitz, the lion’s share of overdue borrowers have historically been students who accumulated debt but never actually earned a degree. How to Appeal for Additional College Financial Assistance.
- And the pandemic has forced many students to take a year off instead of paying for remote classes. Some of these students may not return, but will still owe money on the debt they have already taken.
Game state: The termination of the federal student loan began in March 2020 under the CARES Act. It has already been extended three times, and lawmakers have called on President Biden renew it again…
Yes, but: Uncertainty about when the freeze will actually end is part of the problem.
- Loan servicing companies need time to update staff and provide up-to-date information on borrowers’ addresses and bank account information.
- And borrowers must receive six new due date notifications before payments begin, in accordance with the provisions of the CARES Act.
- And the borrowers themselves need clarity. Drink interview published late last year, showed that borrowers of student loans do not understand how the suspension of payments has affected them.
Catch up quickly: When the pause expires, borrowers can temporarily postpone payments, proving economic hardship or unemployment. They can also pursue an income-based payment, which is a plan that can cut monthly payments by tying them to the borrower’s income.
- But these processes can be cumbersome, and often the people who need them the most cannot complete them, Sattelmeyer says.
The essence: “For some people, the pandemic has indeed created insecurity, but for many, the pandemic has exacerbated and lifted the curtain on financial instability that has been going on for decades,” she says.