The US Department of Education today announced it is extending the payment break and interest waiver until May 1, 2022 to give it time to assess the impact of the Omicron variant on borrowers and the economy. Borrowers have a few options for using the financial relief offered by the extension.
The payment break and interest waiver saves the typical borrower about $ 100 per month in interest.
One of the main risks of the new extension is that no one will believe that reimbursement will resume on May 1 after the previous extension was labeled “final”. There will always be another variant of the virus of concern.
However, fear of the virus, as opposed to the virus itself, could contribute to a self-fulfilling prophecy of economic setback.
As Franklin D. Roosevelt said in his inaugural address, “the only thing we have to fear is fear itself – a nameless, unreasonable and unwarranted terror that cripples the efforts to convert retirement ahead of time. “.
A further extension of the payment break and the interest waiver is not really necessary. Unemployment rates for college graduates have returned to normal. Among borrowers who were not eligible for the payment break and the interest waiver, deferral, forbearance and default rates returned to pre-pandemic standards. Delinquency rates are better now than they were before the pandemic.
Nonetheless, the three-month extension gives borrowers more time to prepare for the repayment restart. They can save money to make it easier to start paying off their student loans again. They can pay off higher interest debts that are not suspended, such as credit card debt. They can use the money to build up or increase their emergency fund.
Borrowers should also take a few steps to ensure a smooth transition to monthly student loan payments:
- Update your contact information with the loan department and at StudentAid.gov. This will ensure that you know your new payment due date and your loan payment amount (or yet another payment break extension).
- If you’re signed up for AutoPay, where monthly loan payments are automatically transferred from your bank account to the lender, don’t assume automatic payments will restart. You may need to reaffirm that your bank account information has not changed, or provide the new bank account information if it has changed.
- If you don’t use AutoPay, consider signing up. Not only are you less likely to be late on your payments, many lenders will lower your interest rate by a quarter of a percentage point as an incentive.
- If you are on an income-based repayment plan and your income has declined, have the loan manager recertify your income sooner, so you qualify for a lower monthly loan payment.
- If you won’t be able to make your student loan repayments when the repayment starts again, contact the loan department to inquire about your options. You can continue a payment break through postponing unemployment, postponing economic hardship, or general forbearance. However, interest may continue to accrue during an adjournment or an abstention. If your income is below 150% of the poverty line, you can get a zero monthly loan under an income-based repayment plan, such as IBR, PAYE, and REPAYE.