5 things student borrowers shouldn’t be doing by September
It’s a bit of a strange time to be a student borrower. Payments and interest on many federal student loans have been suspended for more than two years. Meanwhile, the student loan system is undergoing significant upheaval as loan managers change, and the Biden administration has temporarily changed rules for existing student loan forgiveness programs while also considering broader loan forgiveness. .
In this time of unprecedented uncertainty, there are some actions student borrowers can do not want to take – at least for now.
Don’t pay off your federal student loans until September
Now may not be the best time for borrowers to pay off their federal student loans (if they are able to do so). Federal student loans held by the government are still covered by the ongoing relief provided by the CARES Act, which has suspended payments and suspended interest accrual since March 2020. The most recent extension of this relief by President Biden is ends on August 31, 2022, but this could be extended even beyond this date.
Since the Biden administration is considering some form of blanket student loan forgiveness, there’s no harm in waiting for full repayment, especially since interest remains at zero and no payments are due. before September at the earliest.
Don’t refinance your federal student loans until September
One of the main reasons to refinance student loans is to get a lower interest rate. But under current law, the only way to refinance a student loan is through a private lender. And borrowers who refinance their federal student loans through a private lender would permanently walk away from the consumer protections and program benefits of the federal student loan system – including the possibility of student loan forgiveness.
Interest rates are 0% on federal government-held student loans through at least September, and borrowers won’t get a better rate than right now in the private student loan market.
Don’t pay your student loans during the payment break
Borrowers who are covered by the ongoing student loan payment suspension do not need to make any payments. Voluntary payments are permitted and, as no interest accrues, any payments made during the suspension period will further contribute to the repayment of your loan balance.
However, given the absence of accrued interest, there is really no difference between making a regular payment each month and waiting until the end of the payment pause period to make a one-time lump sum payment. Making a lump sum payment at the end of the payment pause could give borrowers more flexibility (especially for unforeseen expenses or difficulties that arise during the payment pause), as well as a small strategic advantage while waiting to see what , if necessary, additional student loan relief provided by the Biden administration.
Borrowers who made voluntary payments during the payment break can request a refund of those payments by contacting their loan officer, according to the Department of Education.
Don’t ignore your student loan account
While it might be easy to just ignore your student loans if they’re covered by the current payment break, that could be a mistake. A lot has changed in the past two years. Several major loan servicers have left the federal student loan system (or are in the process of doing so), and millions of borrower accounts have been transferred to different servicers.
Meanwhile, the Department of Education is offering automatic student loan forgiveness to thousands of borrowers under new program extensions – and you might not know it if you haven’t updated your details or if you recently logged into your student loan account.
Borrowers should ensure their contact information and records are up to date with their StudentAid.gov account and with their current loan officer. Your StudentAid.gov account will also provide contact information for your loan officer if there have been any changes since 2020.
Don’t Ignore Student Loan Forgiveness News
The Biden administration recently enacted sweeping — but temporary — changes to federal student loan forgiveness programs, including the Public Service Loan Forgiveness (PSLF) and Income Contingent Repayment (IDR) programs. Although some of these changes are implemented automatically, some borrowers may need to follow specific steps to qualify. And there are deadlines. If borrowers don’t act, you could miss out on critical new relief, up to and including complete federal student loan forgiveness.
Given that President Biden is also reportedly considering an even broader student loan forgiveness, which may also require an application process depending on how it is structured, it is essential that student borrowers monitor news and updates. day so as not to miss the boat. significant new relief.
Further Reading on Student Loans
40,000 student borrowers will automatically get ‘immediate debt cancellation’ – but questions remain
Want student loan forgiveness? To qualify, borrowers may need to do this first
Thousands of Jobs Qualify for Expanded Student Loan Forgiveness Program
Who qualifies for student loan relief under Biden’s huge new income-based repayment expansion