During the COVID-19 pandemic, federal student loan payments were suspended, interest rates were temporarily set to zero, and lenders were advised to halt collections on defaulted loans. However, the recent bipartisan debt ceiling has put an end to student loan relief from Covid-era rules. Starting on August 29th of this year, borrowers will need to begin repaying their loans, which may come as a surprise to those who have grown accustomed to the extra available funds. Professionals recommend contacting your lender promptly and following these four helpful tips*:
- Update Contacts: Make sure to update your contact information on your loan servicer's website and your gov profile.
- Payment Info: Log in to your loan servicer's website or directly contact them to get details about your next payment and review your auto-debit enrollment.
- Choose a Repayment Plan: Utilize the Loan Simulator tool to find a repayment plan that aligns with your needs and goals or consider
- Consider IDR: Explore the option of applying for an income-driven repayment (IDR) plan that can make your payments more affordable based on your income and family
In addition to the resumption of loan repayments, significant changes to the student loan industry are being proposed by the government. Alongside the well-known blanket forgiveness proposal, the Debt Relief Plan includes modifications to the IDR option for Federal loans. These changes encompass reduced payments, potential government coverage of interest payments, and lower income thresholds to qualify for payment avoidance. The plan also suggests forgiving loan balances after 10 years of payments, rather than the current 20-year requirement, for borrowers with balances of $12,000 or less. Although the debt forgiveness plan was rejected by the Supreme Court of the United States at the end of June, these additional changes are likely to be pursued as a compromise and could potentially impact millions of borrowers. If you know anyone, including your children, relatives, or others, who are struggling to navigate these rules, please let us know if we can be of assistance.
*Source: Federal Student Aid an office of the U.S. Department of Education