News
How borrowers can keep their student loan payments on hold once bills resume
Published
1 year agoon
By
New Yorker
Riska | Istock | Getty Images
Payments likely to resume within months
The Education Department in November said student bills would resume 60 days after the litigation over its student loan forgiveness plan resolves. If the high court hasn’t ruled on the plan by the end of June, or if the Education Department is unable to carry out its relief by then, the bills will pick up at the end of August.
It’s possible the White House could try to extend the pause again, Kantrowitz said. He noted that the Education Department had said on two occasions that a previous extension of the payments pause would be the final one — only to prolong the pause yet again.
Still, it would be wise for borrowers to be prepared for the bills to resume sooner rather than later.
Deferments may keep interest from accruing
When the break ends, you may be able to postpone your student loan payments for more time by requesting a deferment or a forbearance.
Borrowers should first see if they qualify for a deferment, because their loans may not accrue interest under that option, whereas they almost always do in a forbearance, experts say.
If you’re unemployed when student loan payments resume, you can request an unemployment deferment with your servicer. If you’re dealing with another financial challenge, you may be eligible for an economic hardship deferment.
Those who qualify for a hardship deferment include people receiving certain types of federal or state aid and anyone volunteering in the Peace Corps, Kantrowitz said.
With both a hardship and an unemployment deferment, interest generally doesn’t accrue on undergraduate subsidized loans. Other loans will rack up interest, however.
The maximum time you can use an unemployment or hardship deferment is usually three years per type.
Other, lesser-known deferments include the graduate fellowship deferment, the military service and post-active duty deferment and the cancer treatment deferment.
Forbearances also keep bills on hold
Student loan borrowers who don’t qualify for a deferment may request a forbearance.
Under that option, borrowers can keep their loans on hold for as long as three years. However, because interest accrues during the forbearance period, borrowers can be hit with a larger bill when it ends.
Kantrowitz provided an example: A $30,000 student loan with a 5% interest rate would increase by $1,500 a year under a forbearance.
A deferment or forbearance should be a last resort, but they are better than defaulting on the loans.
Mark Kantrowitz
higher education expert
If a borrower uses a forbearance, he recommends they at least try to keep up with their interest payments during the pause to prevent their debt from increasing.
“A deferment or forbearance should be a last resort, but they are better than defaulting on the loans,” Kantrowitz said.
Betsy Mayotte, president of The Institute of Student Loan Advisors, a nonprofit, said she recommends borrowers only use a forbearance or deferment for short-term hardship, including a sudden big medical expense or period of joblessness.
Struggling borrowers are best off finding a payment plan they can afford, said Mayotte.
Other options for struggling borrowers
Income-driven repayment plans aim to make borrowers’ payments more affordable by capping their monthly payments at a percentage of their discretionary income and forgiving any of their remaining debt after 20 or 25 years.
Currently, the Biden administration is working to roll out a new repayment option under which borrowers would pay just 5% of their discretionary income toward their undergraduate student loans. The savings would be huge.
According to an example provided by Kantrowitz, a borrower who made $40,000 a year would currently have a monthly student loan payment of around $151 under the existing Revised Pay As You Earn Repayment, or REPAYE, plan. But with the new option, that monthly bill would plummet to $30.
And some borrowers wouldn’t owe anything each month.
To determine how much your monthly bill would be under different plans, use one of the calculators at Studentaid.gov or Freestudentloanadvice.org.
Source: CNBC
Ozempic or Bust
Hamburg: 37-year-old caught with skull knuckles in his hand luggage
Look inside Cape Cod’s Candleberry Inn, named the No. 1 B&B in America
Heiress and TV Producer Hubby Sue for the Right to Tear Down Marilyn Monroe’s Home
Police clear GW protest ahead of DC mayor’s appearance on Capitol Hill
A Walnut Recall Has Been Linked to a Multistate E. Coli Outbreak
We Asked a Psychologist Why So Many Average Men Think They Can Beat a Top Female Athlete in Her Sport
The Empty Promises of ‘Medical-Grade’ Skin Care
Election 2024 live updates: Trump to hold rallies in Wisconsin, Michigan during court break
Are Lululemon’s Leggings Getting Smaller?
Look inside Cape Cod’s Candleberry Inn, named the No. 1 B&B in America
It’s Possible to Hack ‘Tetris’ From Inside the Game Itself
Panera to stop serving ‘Charged Sips’ drinks after wrongful death lawsuits over caffeine content
Burnout Is Pushing Workers to Use AI—Even if Their Boss Doesn’t Know
Review: De’Longhi La Specialista Arte Evo Espresso Machine With Cold Brew
Trending
-
Travel22 hours ago
Travel & Tourism Injected €215BN into Italy’s Economy
-
Auto21 hours ago
Bob Lutz Explains How GM Decided Which Brands to Kill in 2008
-
Travel21 hours ago
ATM 2024 experts examine Indian travel and tourism opportunities
-
Travel18 hours ago
TOURISM MALAYSIA STRENGTHEN TIES WITH WEST ASIA AT 31ST ARABIAN TRAVEL MARKET
-
Travel23 hours ago
Emirates to retrofit an additional 71 A380s and B777s
-
Auto20 hours ago
Volkswagen’s New California Camper Van Gets More Space and Hybrid Power
-
Wellness20 hours ago
Here’s What Getting a Skin Patch Test Is Really Like
-
Tech21 hours ago
Tech Moves: NanoString CEO and CFO depart; Temporal founders swap roles; Gradial adds exec