For those who have been sweating about the prospect of having to resume student loan payments, there’s some good news: The Department of Education has extended the federal student loan forbearance period to May 1, 2022. This includes the pause on loan payments, no interest accumulation, and no collections on defaulted loans. Certainly, these programs continue to help many people across the United States.
But there’s no indication as to what happens after May 1, 2022. While student loan borrowers have gotten lucky so far, as the pause period has been extended many times, it’s unclear if this will happen again. This leaves many individuals in a precarious situation where they’re not sure when they’ll have to resume making payments again. For those with a tight budget, it can be stressful having to think about the end of loan forbearance. Let’s take a look at some options of what to do when student loan relief ends.
What to Do When Student Loan Relief Ends
Everyone has a different situation. Due to this, it’s impossible to say there’s one solution that everyone can follow to success at the end of student loan relief. There are a few main roads borrowers can go down when student loan relief ends. Here are the top options:
- Consolidate student loans – Student loan consolidation can be done through the federal government or through a private lender. This involves bundling your outstanding loans into a single, combined loan. Not only can this simplify your debt repayment when you have only one loan instead of many, it can also lower your monthly payments. Student loan consolidation can be a great option for many students for both of these reasons. It’s important to note, though, that your interest rates don’t actually go down when you consolidate through the federal government. This means you might actually end up paying more over time if you extend the term of you loan, as you’re allowing your balance to stay larger for longer, which means more interest.
- Talk to your loan servicer – Those who are concerned about their ability to restart payments on their student debt after May 1 should consider talking to their loan servicer. It’s possible they’ll be able to work out a deal with you that will make your loans more affordable.
- Refinancing student loans – Those with private loans, or individuals with high-interest federal loans might want to consider a student loan refinance. Even though a student loan refinance can only be done through a private lender, there are some potential benefits. So, what is refinancing? It’s basically a process of taking out a new loan with better repayment criteria than your current one. This can make loan repayment much more reasonable for those who are otherwise struggling to pay their bills. It’s important to note, though, that you’ll lose federal benefits like income-driven repayment plans and forbearance if you go this route.
There are some solid options for borrowers to consider for getting their finances in order when the pause on student loan payments ends in the future. At the same time, there are a few things that you need to beware of when seeking options for reducing your student loan burden.
Things to Look Out for As Student Loan Relief Winds Down
In all things financial, there are going to be people and organizations that exist purely to rip you off. You need to look out for this when search for ways to improve your student loan debt situation after the resumption of payments.
There are lots of different student loan scams. They come in all shapes and sizes, but can all be highly damaging to your financial health. Beware of any cold calls or offers that sound too good to be true. Also, never give away your FSA ID password. This can be used to forge your signature of consent.
Many are wondering what they’ll do when student loan repayments start again. If you’re unsure how you’re going to afford to pay your loans after May 1, now is the time to start making preparations.
