As the coronavirus pandemic continues and the economy recovers, some American workers continue to face financial uncertainty.
For those struggling to manage their debt, there are relief options available from banks, lenders, and the federal government. If you are unable to repay your loan or will soon be unable to, one of these programs may help you.
Federal student loans
In August, the U.S. Department of Education extended its federal student loan pause until January 31, 2022. The pause expired on September 30, 2021, and the administration made it clear that this is the last extension. For an additional four months, Federal student loan borrowers and borrowers who defaulted on their Federal Family Education Loan Program loans can benefit from several relief measures.
Interest waiver: Interest rates on federal student loans will remain at 0% until the end of January. Borrowers do not need to take any action to fix this. However, check your student loan statements monthly to make sure that interest on your federal loans is not earning until January.
Suspension of payment: Federal student loan borrowers have also received extended benefits when it comes to monthly student loan payments. Payments on direct loans owned by the Ministry of Education are suspended until January 31st. This suspension of payments also occurs automatically.
This suspension will not clear your student loan debt, but it will save you on monthly payments until January. If you are working on a government service loan forgiveness, you will continue to get the loan during the suspension period if you work full time for a suitable employer.
Borrowers can also continue to make payments during this grace period. If you continue your regular scheduled student loan payments, the entire payment will be credited to your main balance, helping you pay off your debt faster.
If you are using automatic payments, they may have been automatically suspended at the start of the grace period. Contact your service center to start automatic payments again.
Actions with suspended collections: Federal student loan collection activities have been suspended since March 2020, and overdue loans from the Federal Family Education Loans Program were added to the list of eligible loans in March 2021. Borrowers who have defaulted on FFEL loans from March 13, 2020 will have their wages arrested and tax returns automatically restored, their default accounts repaired and reimbursed for voluntary payments made between that date and January 31st.
Private student loans
Private student loan debt is not covered by the president’s decision – there are no government protections that would require private lenders to waive interest or deferred payments for borrowers.
However, your private lender may offer a hardship relief program or a temporary grace period for your student loan. For example, Earnest offers short-term deferred student loan repayment to eligible borrowers upon request.
If you are unable to repay your private student loans because the pandemic has affected your income, contact your lender immediately. Eligibility is dependent on lenders for eligibility.
Many banks are taking steps to waive fees and help consumers not pay back their loans despite losing income. For example, Marcus by Goldman Sachs allows customers to defer payments on their personal loans for one month with no interest charges.
If you are unsure if your lender offers personal loan assistance, contact them directly to inquire. New programs may be announced on a regular basis, so check back regularly to see if help is available.
Loans secured by real estate
Homeowners with mortgaged real estate loans should contact their lenders if payments cannot be made on time. Some financial institutions offer a temporary grace period for mortgage loans for those who are eligible.
For example, Bank of America offers a grace period of three months or more if your income has been impacted by the coronavirus pandemic. If you are struggling to keep the top of your home loan, call your lender to find out more about your options.
Other steps you could take
Talking to your lender as soon as possible is one of the most effective ways to get immediate payment relief in times of financial difficulty. In addition to setting up a deferred or deferred payment, there are a few more steps you can take if you are unable to repay your loan:
Apply for unemployment benefits: The U.S. Bailout Plan Act of March 2021 increases the total number of weeks people can receive unemployment benefits to 79 weeks.
Reduce discretionary spending: Review all your nonessential expenses like meals away from home, purchases, and streaming subscriptions. Find areas that you can cut from your monthly budget to free up money for loan payments.
Refinance loans: If you have good credit, you may be eligible for the current low interest rates. Refinancing can help lower your interest rate and lower your monthly payment.
Consider a loan for harsh living conditions due to coronavirus: Available from some banks and credit unions, loans for those in need of coronavirus are short-term loans that usually have low or no interest rates. Although the loan amounts are not very large, these loans are provided on favorable terms for the borrowers.
No matter what type of loan you are struggling with, there is a good chance that your lender has options that can ease some of the financial pressure. It is best to contact your lender if you will not be making the next payment on the loan.