The other day I did something that I haven’t done in over a year: I logged into my student loan account. Or at least that’s what I tried. It turned out I forgot my password and couldn’t get in. Instead of following the steps to change, I closed the browser and refused again.
In the fall of this year, borrowers will have to make room in their lives and in their budget again for the monthly installments for the student loan. It was a good run. For the first time in March 2020, the U.S. Department of Education gave borrowers the option to pause their bills without incurring interest. (Most federal student loan borrowers accepted this offer.)
Many borrowers have grown used to living without a high monthly student loan bill and are unlikely to be looking forward to the October break that ends.
“Student loan payments were out of sight and out of mind,” said Elaine Griffin Rubin, senior contributor and communications specialist at Edvisors.
To ease your anxiety (and my own!) A bit, I spoke to experts about what you need to know about the change and how best to prepare for it.
When are bills due again?
In October. Your exact due date will depend on the time of the month that you started paying your student loan.
There is still a chance that borrowers will get more time: recently Education Minister Miguel Cardona said an extension is being considered.
“It will probably depend on the state of the economic recovery by then,” said university expert Mark Kantrowitz. “I doubt they’ll extend it beyond the end of the year.”
Don’t expect to have more time, said Betsy Mayotte, president of the Institute of Student Loan Advisors, a nonprofit.
“While it’s still a possibility, it’s not guaranteed,” she said. “It is best to prepare now – the student loan call centers will get busier as we near October.”
What should I do now?
Over the next three months, borrowers should make sure their student loan broker has their up-to-date contact information, Kantrowitz said. For example, if you’ve moved, they may not be able to.
If you were signed up for automatic payments and your bank details have changed, you should also inform your servicer about this.
Setting aside some cash when payments start again can also make the transition less painful, experts say.
What if I fear that I will no longer be able to make the payments?
How do I choose the right payment plan?
Many people’s lives have changed as a result of the pandemic.
If your circumstances look different than they were more than a year ago, it may be useful to review the payment plans available to you and find one that is best for your current situation.
In the meantime, the law has also changed.
Student loan making is now tax-free until at least 2025, thanks to a provision included in the $ 1.9 trillion federal coronavirus stimulus package that President Joe Biden signed in March. The policy will likely be permanent.
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This can make income-oriented repayment plans more attractive, as they often come with lower monthly bills and borrowers are unlikely to face a massive tax burden at the end of their 20- or 25-year payments.
But if you can afford it, the standard repayment schedule is only 10 years.
To work out what your monthly bill would be on different plans, use one of the calculators on Studentaid.gov or Freestudentloanadvice.org, Mayotte said.
If you decide to change your repayment schedule, Mayotte recommends submitting this application to your servicer by early September.
“I have serious concerns that there will be major maintenance delays,” Mayotte said.
Is it still possible to issue student loans?
Biden has asked the US Department of Justice and the US Department of Education to review his legal authority to cancel student debt through executive action. The fact that these reports are pending may explain why we haven’t heard anything more definitive, experts say.
“He will take no steps until this report comes back,” said Kantrowitz.
Even if government officials conclude that Biden does not have such authority, there could still be hope.
While Democrats may find it difficult to pass a student debt forgiveness bill in Congress given their wafer-thin majority, they could enact such a bill as part of the budget reconciliation process this fall. This path would not require Republican support.
Should I consider refinancing my student loans?
Borrowers considering converting their federal student loans into private loans at a lower interest rate may want to wait, Kantrowitz said. For one thing, most federal student loans have an interest rate of 0% for at least an additional three months.
In addition, “they will feel foolish if they refinance just for the federal government to announce a loan waiver,” said Kantrowitz.