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More than 16 months have passed since the federal student loan suspension program went into effect, and the end of the grace period – September 30 – is fast approaching.
But the question of resuming the payment of student loans is acute. There is evidence that service companies are not ready to resume receiving payments, and many borrowers are unable to make them. Some legislators are proposing to extend the grace period or cancel student loan debt in general.
This is where things are now and what could be next.
Department of Education Legislators Request Extension of Student Loan Suspension
Most federal student loans have been suspended since March 2020. President Joe Biden extended the period of abstinence until September 30, 2021, just hours after opening. No payments were due and no interest was charged on loans during the grace period. Borrowers with unpaid student loans also cannot be refunded their wages during the abstinence period.
In early July, Senators Elizabeth Warren (D-Massachusetts) and Edward J. Markey (D-, wrote a letter Urging President Joe Biden to extend the current grace period until at least March 30, 2022 due to ongoing support staff issues, including staff shortages to resume receiving payments in less than three months, and for the dire financial situation of many stressed borrowers.
After talking with loan officers and borrowers, Massachusetts senators concluded that “neither student loan borrowers nor student loan servicers are ready to renew payments, and service providers will take a significant amount of time to ensure that staff and procedures we are ready to provide borrowers with a high level of support, ”the letter says.
It includes an anecdote from one service staff describing the difficulty of renewing payments as “unprecedented” with over 43 million invoices going into redemption status at the same time.
Legislators and service providers expect phone lines to be congested at the end of the abstinence period as borrowers who still need help will try to contact their service provider to discuss their options.
According to the letter, only one support staff has conducted “extensive and ongoing” outreach to borrowers about their options to avoid default at the end of the abstinence period, and most are still awaiting guidance from the Department of Education’s Office of Federal Student Aid before starting work. … …
It’s not just lawmakers who are demanding more time. Ministry of Education officials have recommended extending the abstinence period. as reported by “Politiko”… There will be an extension until the end of January 2022, according to people familiar with the matter, but the Ministry of Education has yet to take an official position to extend the abstinence period beyond September 30.
Borrowers, meanwhile, report that they are not ready for the end of the abstinence period. BUT June poll Of the nearly 24,000 student loan borrowers undertaken by the Student Debt Crisis advocacy group, it was found that 90% of respondents were not prepared to renew their student loan payments in October.
Even if this is an exaggeration, the economy still has something to do before it gets back to normal. Millions of people are out of work, and the unemployment rate among those with a college degree is now nearly double what it was before the pandemic.
Will Biden cancel student loan debt?
There is always an unresolved question about student loan debt: will it ever just get canceled?
The prospect of writing off student loan debt sparks fiery rhetoric on both sides of the aisle. The blaze was further exacerbated by economic uncertainty during the pandemic, as some progressives, including Rep. Alexandra Ocasio-Cortez of New York State, pushed even stronger for canceling student loan debt.
Recently Biden canceled $ 3 billion student loan debt for victims of commercial fraud in college. He also supports cancellation of $ 10,000 student loan debt per borrower – a far cry from a progressive push to repay $ 50,000, but it remains unclear how committed he is to any large-scale loan cancellation.
How To Prepare To Pay Your Student Loan Renewal
Other forms of economic aid from Covid-19 will soon end. Biden made it clear that the CDC’s moratorium on evictions and extended unemployment benefits will not be extended, so student loan borrowers should be careful and prepare to end relief measures.
If you are concerned about how you will handle renewed student loan payments, consider the following options:
Consider an income-driven repayment plan. Borrowers in financial difficulty should consider an income-driven repayment plan to keep their monthly payments manageable – and to avoid default on the loan. Under this type of payment plan, monthly payments are based on your income, location, and family size. Keep in mind that these plans will continue to charge interest, which means lower monthly payments will increase your total bill over the life of the loan.
Prepare your budget for student loan payments. If you’ve used the freed-up money that you would have spent on your monthly student loan payments for something else, now is the time to start putting it back on your balance sheet. Start by making a payment to your budget, perhaps converting it into your savings or making payments now so you can adjust your spending to the level it was before the abstinence period.
If you are unable to resume payments, contact your service staff as soon as possible. Individuals who absolutely cannot afford the monthly student loan payment should contact their service staff for information on enrolling in postponement or patience… However, these relief options should not be taken lightly; they are for borrowers who need significant assistance, are eligible, and in some cases still receive interest during the granted benefit period. Asking your service agent now to discuss your options may be a good way to prepare a plan for when your current abstinence period ends.