Our goal is to give you the tools and confidence you need to improve your finances. Although we receive compensation from our partner lenders, which we will always identify, all opinions are our own. By refinancing your mortgage, the total finance charges may be higher over the life of the loan.
Credible Operations, Inc. NMLS # 1681276, is referred to herein as “Credible”.
President Joe Biden announced up to $20,000 in forgiveness for federal student loan borrowers on Wednesday, August 24, 2022 and extended the student loan payment pause until December 31, 2022. If you have loan balances remaining federal students after the remission, you won’t need to start making payments on the remaining amount again for another four months.
Here’s what you need to know about student loan forgiveness and the extended pause on student loan repayments:
What this means for federal student loan borrowers
Many borrowers will benefit from President Biden’s announcement, but not all. If your annual income is more than $125,000 for singles or $250,000 for married couples filing jointly, you will not be eligible for the rebate.
But if your income is below the threshold, you could see your federal student loan balance reduced by up to $20,000. If you have taken out federal student loans and also received Pell Grants, you are eligible for $20,000 forgiveness of your federal debt. If you have federal student loans but have not received Pell Grants, your forgiveness amount is $10,000.
Extended payment break “one last time”
President Biden also extended the payment pause for federal borrowers through December 31, 2022. In announcing the extension, the Department of Education said this extension would be the last.
The CARES Act first introduced the suspension of payments in March 2020. Borrowers were not required to make payments on their federal student loans, and their loans did not accrue interest. The payment break has now been extended seven times.
Nearly 37 million borrowers saw about $195 billion in loan repayments canceled between March 2020, when the deferral began, and April 2022, when the deferral was last extended, according to the Federal Reserve.
Learn more: What to know about the CARES Act and student loans
When will student loan repayments resume?
If you still have a federal student loan balance after forgiveness, you will need to start making payments again after December 31, 2022. At least 21 days before your first payment is due, you will receive a billing statement or other type of notice. notice which will include your payment amount and due date. You can also contact your loan manager at any time to get an estimate of your payment and due date.
Before payments resume, the US Department of Education recommends that you:
- Make sure your loan manager has your correct contact information. You can sign in to your account on your repairer’s website or mobile app.
- Check your autopay enrollment or sign up for autopays. This may allow you to obtain a reduction of 0.25% in the interest rate of your direct loan.
- Evaluate your repayment plan with the loan simulator tool. If your financial situation has changed since the deferral began, you may need to adjust your repayment plan.
What to do if you can’t repay your student loan
If you are unable to make your federal student loan payments, you have several options that may help:
- Talk to your loan officer about a different repayment plan. Four main types of income-driven repayment plans are available to help you set your monthly payment at an affordable level, based on your family size and income.
- Consider consolidation. A federal direct consolidation loan merges several federal student loans into one and allows you to extend your repayment period for up to 30 years. A longer repayment period could lower your monthly payments, although your new interest rate may not necessarily be lower than your current rates.
- Consider refinancing. If you don’t qualify for income-based repayment or student loan forgiveness, refinancing with a private student loan could get you a lower interest rate or help you repay your loans longer. rapidly. Just keep in mind that you will lose access to federal loan benefits, like IDR plans and rebate programs.
- Explore adjournment or abstention. If you can demonstrate economic hardship, are in the military, or meet other qualifications, you may be able to ask your servicer for one of these options that suspend your payments for a number of months. Keep in mind, however, that interest may continue to accrue and none of these options will help you pay off your loans faster.
Keep reading: The Complete List of Student Loan Forgiveness Programs