Friday, May 27 2022

Student loans may be due again as of January 1. If that is the case, make sure you do these 7 things.

Here’s what you need to know.


Student loans

If Congress or President Donald Trump doesn’t extend student loan relief, your student loans will be due from January 1, 2021. What about the student loan cancellation plan? Don’t count on student loan cancellation yet. Congress passed the Cares Act – the $ 2.2 trillion stimulus package – in March, which offered the following temporary relief to student loan borrowers:

  • Federal suspended payment student loans
  • stopped new accrued interest on federal student loans
  • order to collect defaulted student loans

When that student loan relief expired on September 30, Trump – by executive order – extended that student loan relief until December 31, 2020. When it expires, your student loans will be due in the ordinary course from January 1. 2021. loan repayment, make sure you do the following 7 things:

1. Contact your student loan manager now

Don’t wait until January 1 to start calculating your student loans. Contact your student loan manager now to understand all of your student loan repayment options. Specifically, check your expected monthly payment, your current student loan balance, and your interest rate. This is especially important if you are a recent graduate and your grace period has ended.

2. Sign up for an income-based repayment plan if you are in financial difficulty.

If you are experiencing financial difficulties, are on leave or unemployed, or if your income has changed, you may want to consider a income based repayment plan for your federal student loans. There are four main income-based repayment plans: Income-Based Repayment (IBR), Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE) and income-tested reimbursement (ICR). With an income-based repayment plan, your monthly student loan payment is typically 10-20% of your discretionary income and is based on your discretionary income, family size, and state of residence. If you’ve already signed up for an income-based repayment plan, now is the time to contact your student loan manager to update your income. After 20 years or 25 years of monthly student loan payments, you can qualify for a student loan discount.

3. Count your payments for civil service loan cancellation

If you continue public service loan discount, make sure that you have received a “credit” for student loan payments for the months that your federal student loans have been forborne from student loans. The Public Service Loan Forgiveness Program provides student loan forgiveness to student loan borrowers who work full-time for a qualified public service or non-profit employer and make 120 monthly payments on their federal student loans. Under the Cares Act, you are entitled to receive “credit” for the 120 monthly payments, even if you have not made any federal student loan payments during the student loan forbearance period. Contact your student loan officer to make sure your student loan payments have been counted correctly.


4. Consolidate your FFELP or Perkins loans

Under the Cares Act, only federal student loans held by the US Department of Education qualify for student loan relief. This means that if you have FFELP loans or Perkins loans, you have not received any student loan benefit for these federal student loans. Both are considered federal loans, however, they may not be owned by the federal government. For example, FFELP loans were issued before 2010 by banks and other financial institutions, while Perkins loans are issued by colleges and universities. If student loan relief is extended and you want your FFELP or Perkins loans to become eligible for student loan relief, you must consolidate those loans into a direct consolidation loan. When you consolidate federal student loans, the interest on your outstanding student loans will be capitalized, which means it will be added to your principal balance.


5. Count your payments for your student loan rehabilitation

If your federal student loans are past due and you are rehabilitating your student loans, make sure your non-payments during this student loan forbearance period have been counted correctly. During this period of student loan relief, student debt collection was temporarily halted. If you rehabilitate your federal student loans, you must make nine student loan payments. Contact your student loan manager to make sure your payments have been counted correctly.

6. If you are having financial difficulties, contact your agent to discuss private student loans.

Your private student loans are not covered by the Cares Act. Therefore, when federal student loan relief expires on December 31, 2020, there should be no change in your payments for private student loans. If you are having financial difficulty, contact your private student loan manager to discuss student loan payment options, including options for withholding or deferral available. If your lender or student loan officer offers alternative payment options, make sure you understand the fine print, including interest charges and terms. (If there is student loan forgiveness, this will most likely be for federal student loans, rather than private student loans).


7. Refinance your student loans

If you are not in financial difficulty and want to save money on your student loans, student loan refinancing is a great option. The goal of refinancing student loans is to get a lower interest rate, save money, and pay off student loans faster. When you refinance student loans, you combine your existing federal student loans, your private student loan, or both into a new student loan with a lower interest rate. With student loan refinancing, you can choose your repayment term (5-20 years) and your interest rate (fixed or variable). To qualify, you must be employed, have good to excellent credit (credit score of 650 or higher), a stable monthly income, and a low debt-to-income ratio. Lenders want to make sure you have enough monthly cash on hand to pay for living expenses, student loans, and any other debt. You can go to multiple lenders to find the best match, and you can even check your interest rate for free without impacting your credit score before you apply. You can also apply with a qualified co-signer to get approval and get a lower interest rate.

This student loan refinance calculator shows you how much money you can save when you refinance student loans.


Pay off student loans

Want to know the best way to pay off student loans? There are many options, and here’s a good place to start:


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