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Payments are currently on hold, interest-free, for most federal student loan borrowers until September 2021. President Joe Biden extended the payment break immediately after taking office. This policy does not apply to private student loans.

Borrowers can still make payments to reduce their debt during this period of suspended payments, called forbearance. Contact your repairer if you have any further questions.

Make no mistake: this is a break from payments, not forgiveness. Your debt will be waiting for you when repayment begins at the end of the forbearance, unless the politics change again. While the Biden administration has said it plans to push for an accelerated $ 10,000 remission for all federal borrowers, few observers believe such a bill could be rushed through Congress.

In the meantime, here’s how to decide what to do next.

If you want to suspend payments

You don’t have to do anything to get a forbearance from stopping student loan payments. Interest will not continue to accumulate, as it normally would.

A abstention may give you leeway to deal with other financial issues.

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If you are unemployed or working reduced hours, an abstention can free up money to pay rent and utilities or grocery bills. Even if your salary is not affected, a forbearance could help you divert money to building an emergency fund or help you pay off other, more urgent debt.

Usually forbearance is given at the discretion of the Servicer and interest will continue to grow. In this case, the Department of Education instructed all duty officers to automatically place all loans into interest-free forbearance.

If you’re behind on your student loan payments (or late)

Payments are automatically suspended for all borrowers, including those who were more than 31 days past due before March 13, 2020, or became more than 31 days past due shortly thereafter. This means that the loans are in arrears and will not default.

Defaulting on federal loans occurs when a payment is 270 days past due, sending your loan to collections and exposing you to damaged credit, foreclosed wages, and foreclosed tax refunds.

For borrowers in loan rehabilitation, each month of the initial abstention period and the extension until September 30, 2021 and beyond would also be taken into account in the nine months necessary for the rehabilitation.

For those with past due federal student loans, all collection activities are suspended for as long as the forbearance lasts. You can get a refund for any forced student loan payments made since March 13, 2020. If your tax refund was entered before March 13, 2020, it will not be returned.

If your loans were already forborne, any interest already accrued will still be added to your loan principal when your repayment begins, but during the current waiver, no new interest will be calculated.

If you are looking for a civil service loan remission

Automatic forbearance will not reverse your progress towards the Public Service Loan Discount, or PSLF. As long as you are still working with an eligible employer, the months spent in abstention will count towards the PSLF.

Making payments during automatic forbearance will not allow you to advance on payments. You are in the same boat whether you pay or not.

Under normal circumstances, only full payments count. You also won’t lose credit for payments you’ve already made.

If you want to continue making payments

Borrowers might want to continue paying off federal loans if they want to pay off their debt faster.

If you continue to make payments, you will not pay any new interest on your loans during the forbearance period. That 0% interest rate will save you money overall, even if your payment won’t be lower.

The full amount of your payment will be applied to your loan principal balance once all interest accrued before March 13 has been paid.

Whether or not to make a payment during this time will depend on your initial repayment strategy:

  • Those who stick to a standard repayment schedule (usually 10 years) might consider making payments. You probably won’t have a lot of unpaid interest, and additional payments can help reduce your principal during the break. To maintain your flexibility, we suggest that you open a savings account and cash out those monthly payments, then make a lump sum payment on your loan at the highest interest rate at the start of the repayment.

  • Borrowers enrolled in, or planning to do, an income-based repayment shouldn’t bother making payments now if the ultimate plan is to pay until the loans are canceled – typically 20 or 25 years. If you want to pay off your loans sooner, paying now could help reduce the total interest you owe on top of your principal.

  • Borrowers requesting a utility loan forgiveness do not need to make payments until at least September 30, 2021. The months of automatic forbearance will count towards the 120 payments required for the remission.

Contact your loan manager with any questions regarding the continuation or resumption of payments during the forbearance period.

If your income has changed

If you see a change in income and still want to keep paying, the best way to reduce your payment to something more affordable is to request an income-based refund. You will receive a new payment based on your family size and a percentage of discretionary income, and it will be in effect even after the relief expires. You can apply online at studentaid.gov.

If you are already enrolled in an income-oriented plan, be sure to update your income if it has changed due to the economic downturn.

If you have FFEL loans

If you have Federal Family Education Loans (FFELs), you are eligible to receive interest-free forbearance only if the government owns the loans. Most FFEL borrowers will not be – most of the loans in the now defunct program are commercially held.

You can find out who owns your loans by logging into studentaid.gov using your FSA ID.

The only way to get forbearance for FFEL commercially held loans is to consolidate your debt into a new direct loan. But there are downsides to consolidation:

  • Your repayment term will be extended.

  • Your interest rate will increase slightly.

  • Any unpaid interest will be capitalized and added to the total amount you owe.

Temporary interest-free payments may not be worth these additional costs over the long term.

Additionally, if you are already making payments on a income-based repayment plan (IBR), these previous payments will no longer be taken into account for the discount. You will have to start all over again.

Consolidation may make sense if you have FFEL loans and want to qualify for the civil service loan remission. Otherwise, stick to your current loans.

If you have experienced a change in income, you can enroll in the IBR or recertify yourself earlier, if you have already subscribed to this plan. IBR will always take your spouse’s income into account. Your loans are also eligible postponement of unemployment, which can make sense if you’ve lost your job but expect to start working again soon.

How to work with your repairman

If you want to restart payments during automatic forbearance, contact your student loan manager – the private company handles the payment of your federal loans. But you don’t have to do anything to get the forbearance or the 0% interest rate.

To find out which loan service is yours, log into studentaid.gov with your FSA ID.

You can get in touch with any loan service contact center by calling 1-800-4-FED-AID.

For more information, visit studentaid.gov/coronavirus for details to come.

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Mark Lewis

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