(ReliableNews.org) – In 2019, the government paused the repayment of federal student loans until and set the interest rate to zero and the action was extended out until January 31, 2022. The action was in response to the financial struggles caused by the coronavirus pandemic. However, after an outcry from many Americans, the Biden administration extended the deadline another 90 days until May 1, 2022. President Joe Biden stated the reason for the extension was because the government knows “millions of student loan borrowers” are still dealing with financial hardships from COVID-19.
However, that doesn’t mean students who borrowed money won’t still be responsible for repayment of their debts. Those affected should take this time as an opportunity to prepare for upcoming expenses when the loan repayment restarts in the spring.
How to Prepare for Repayment
More than 36 million Americans have loans on pause until May 2022, and it doesn’t appear that the president is willing to forgive all student loan debt. With the coronavirus still very much a part of everyone’s life, those responsible for the debt need to realize spring will come quickly, and now is the time to plan. Education Secretary Miguel Cardona assured the public that the Education Department would provide tools and support to borrowers, giving them the option to choose an income-driven repayment plan. That solution will help keep borrowers from defaulting on their loans and help the government recoup its loaned dollars.
It’s essential to work with lenders now to set up a strategy for loan repayment in 2022. Another important step is to work the payments into your budget now, if possible. Saving now and readying budgets ahead of time could help minimize the financial hit in the spring of the new year.
Also, contact lenders to learn about their particular policies and options because they may vary, and borrowers need to know exactly what will happen when payments resume. It’s critical to make lenders aware of the inability to meet one’s obligations as soon as possible. Plus, make sure they have the most current address and double-check the minimum payment on the loan. Refinancing may also be an option for some looking to reduce their student loan interest rate and payment amount.
Student Loan Forgiveness
Some Democrats are pushing the president to use his power to cancel student debt altogether or reduce the debt by up to $50,000, which is $40,000 more than Biden suggested during his campaign. Based on White House press secretary Jen Psaki’s words on the subject during a press conference in December, it appears the administration is putting the responsibility of forgiveness on Congress. However, she stated neither the House nor the Senate has “sent him a bill on that yet.” While forgiveness is not completely off the table, the action seems unlikely.
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