What To Do If Your Student Loan Is Suspended After The Covid-19 Postponement

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    Student loans without a break

    Since March 13, 2020, federal student loans have been set at 0% interest rates and payments for the loans have been suspended. This interest-free indulgence has brought welcome relief to many student loan borrowers whose finances suffered during the COVID-19 pandemic. We call this the “student loan break”.

    But the student loan postponement is set to expire on September 30, 2021 (although some argue it could be renewed again).

    After such a long break, it is safe to say that no one is happy to have to make room in their budget again for paying out the student loan. But it’s also important to have a plan. Here’s what you need to do to prepare for when the dreaded moment finally comes.

    When are the student loans dormant?

    While the world is far from normal, the Department of Education will end the coronavirus grace period on September 30, 2021. This means that payments for federal student loans will start as early as October 1, 2021.

    If you’ve set up an automatic direct debit on your student loans, expect your normal payment to be in October 2021. Check with your credit service provider for the exact date.

    What if the student loan is interrupted?

    Two big things will happen when student loans stop. First, the interest rate on your loans will return to pre-Covid levels. At the moment the interest rate is fixed at 0%. Starting October 1, 2021, the original lending rate will be restored.

    Second, borrowers must make monthly payments on their federal student loans. These payments have been suspended since March 13, 2020.

    Note: Many analysts have worried that if student loans are interrupted, some borrowers could default. If you have federal loans, You need to check your credit status and the payment that is due. Don’t leave it by default!

    How will student loan forgiveness affect?

    The $ 0 payments made during the Coronavirus Tolerance Period count towards Public Service Loans (PSLF) and Income Driven Repayment (IDR).

    If you made payments during the deferral, request a refund immediately. You are legally entitled to a full refund of all payments made between March 13, 2020 and September 30, 2021.

    Don’t hesitate to request a refund. This is something that you should take care of as soon as possible.

    Tips to Prepare When Student Loan Payments Resume

    The thought of having to put a high student loan rate into what is likely to be a tight budget can be daunting. But don’t stress yourself. Below we cover 5 tips to help you make the transition smooth.

    Prepare your budget

    With eight to nine months with no payments, your checking account may be shocked when loan repayment resumes. Unless you have chosen an income-driven repayment plan (IDR), your new payment will be your payment from February 2020.

    Between now and the end of the year, visit your loan service provider’s website to review your payment. Then build the new payment back into your budget.

    Update your contact details with your credit service provider

    Anyone who has moved or changed phone numbers or email addresses should update their information with their loan service provider. Your loan service provider will help you with any repayment problems you may face.

    An easy solution to this is to make sure you’ve set up your online account so you can see your credit status, information, and even payments.

    If you are concerned that your loan service provider will change (because you might have had Fedloan or GSMR) it won’t happen until a later date. So if these are your current service providers they should be reached out to them.

    Related: The full list of Federal Loan Servicers (with contact information)

    Read emails from your loan service provider

    Loan service providers can send you vital information about where your loan is and what to look for in the event of the student loan interruption. Be careful not to accidentally throw away any communications from your servicer. Read the letters and take the necessary action.

    Here too: If you have set up your credit portal online, you can also opt for electronic account statements and view everything online.

    Deactivate AutoPay if necessary

    If you’ve set up automatic transfers to your 401 (k) account or other accounts to save money on paused payments, be sure to turn them off in January. You don’t want to accidentally overdraw once payments are resumed.

    Consider signing up for an income-based repayment plan (IDR)

    People who lost income in the first nine months of the pandemic may find that the old payment doesn’t fit into the new budget. If so, you should sign up for an income-driven repayment plan (IDR) before the end of the year.

    When you sign up for an IDR plan, your loan payments will not resume prematurely. However, it is important to sign up before making your first payment. To sign up for your IDR plan of choice, visit StudentAid.gov/idr. Click on “Apply now” to start the application.

    How to start paying

    From October 2021, you will have to start paying student loans again. Anyone who has signed up for automatic debit programs will see the payment automatically debited from their bank account. Credit service providers will automatically restart the automatic withdrawals in January.

    Anyone worried that automatic debits will result in overdrafts should call their loan service provider right away. You need to sign out of AutoPay and plan to send manual payments instead.

    Borrowers who have made manual payments must start sending checks or wire transfers through the loan service provider’s website. For more information on manual payments, contact your credit service provider.

    Recertification of income when student loan interruption is lifted

    If you have an IDR plan, you may need to re-certify your income. The income recertification dates have been postponed to some time in 2021. Your credit service provider (s) should send you information about your recertification date.

    Should I pay off my loans at a flat rate?

    While many people have struggled in the past few months, some have increased their savings and incomes. If you have enough money to pay off your loans, now you may want to get rid of them. You can schedule a payment to pay off the loans in full to start 2021 on the right foot.

    If you do not have enough money to pay off your loans in a lump sum, it may be advisable to wait for additional payments. The economy is still shaky and it could be risky to use the savings to get rid of debt at a manageable interest rate. Consider waiting to settle the debt in full before making large additional payments.

    Forgiveness Thoughts: If you feel that a loan can be waived, you should wait a few months in Biden’s presidency before repaying your loan. Waiting never hurts (aside from a few extra months of interest).

    Final thoughts

    As long as your contact and banking information with your servicer is up to date and you’ve made the necessary changes to your automatic transfers, thawing student loan payments shouldn’t cause you too much grief.

    If you’ve lost income or struggled in the past few months, IDR plans can keep your payments manageable. Or, if your financial situation is tough, you should check with student loan refiners to see if one could offer you a lower interest rate.

    Refinancing federal loans was practically of no benefit during the deferral period of 0%. But with the resumption of payments, this could again be a strategy worth considering.

    Regardless of your personal situation, it is important to plan today so that you are prepared for the repayment of the student loan tomorrow.

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