Student loan borrowers just got even more time to get organized and prepare for repayment to resume.
President Joe Biden’s administration announced Wednesday, Dec. 22, that it is extending the pause on federal student loan payments until May 1, 2022. This means payments will not resume until mid-2022 and interest rates will remain at 0%. Biden cited ongoing pandemic-related challenges faced by student loan borrowers as reasoning for the new extension in a White House press release.
“The extension of the student loan pause will give borrowers more time to transition into repayment in May,” says Robert Farrington, a student loan expert and founder of The College Investor. “Given the amount of changes to student loan servicing, this is a win for borrowers who may be losing the child tax credit, have to file their taxes, and more. By moving to May 1, borrowers have a little extra breathing room to get organized and ready.”
The student loan moratorium was originally set to expire on Jan. 31, 2022. The latest extension comes as a bit of a surprise amid growing concern over the Omicron COVID-19 variant: the previous extension was previously described as the “final” extension, according to a statement from the US Department of Education.
While Wednesday’s announcement made no reference to this being the last extension, or whether more might follow, Biden did implore borrowers to start planning now for when payments resume.
“As we are taking this action, I’m asking all student loan borrowers to do their part as well,” Biden said in the release. “Take full advantage of the Department of Education’s resources to help you prepare for payments to resume, look at options to lower your payments through income-based repayment plans, explore public service loan forgiveness, and make sure you are vaccinated and boosted when eligible. ”
What to Do in Light of Biden’s Extension of Student Loan Relief
Student loan balances have effectively been frozen for nearly two years, with no accruing interest or payments required on most federal student loans since March 2020. But any student loan debt you had before the COVID-19 pandemic will still be waiting for you in May.
Experts say you shouldn’t count on any of your debt disappearing in the meantime, because it’s unlikely there will be mass student loan forgiveness —not even the $10,000 that Biden promised during the campaign trail.
These are a few things you can start doing now to prepare for student loan repayment in 2022:
Update your account information
Double check that your information is up to date on your student loan accounts, such as your address, phone number, and email address. Because a lot has changed over the last two years, you might’ve moved to a new address, switched phone numbers, or gotten a new email address. By alerting your loan servicer of any major changes, it’ll be easier for you to stay in touch about your student loans.
Prioritize Other Financial Goals
Between now and May 1, focus on areas where you can make your money go further, such as paying down high-interest debt, building your emergency fund, and contributing to your retirement plan.
Rethink Your Repayment Strategy
Take a look at your current repayment plan and see if it still makes sense for your current financial situation. If not, start researching the right repayment plan for you or reach out to your loan servicer for help. Farrington advises getting on top of it as soon as possible because loan servicers will likely be overwhelmed next year. “I think there will be a lot of chaos when payments resume,” he recently told NextAdvisor in an interview.
Review Your Loan Terms and Details
Create a master list of your student loans, including the servicers, outstanding balances, minimum monthly payments, and interest rates. That way, you’re clear on what you owe, and you can easily double check the pay-off dates and grace periods for each loan.
make a budget
We’re still a few months away, but as we get closer to the end of the forbearance period, get a sense of how much your next payment will be and when it is due in May, so it doesn’t take you by surprise . Then, see how you can fit it into your current budget and take into account any changes to your income. You may need to readjust or cut spending in certain areas to make room for upcoming student loan payments in your budget.
Have a Plan If You Can’t Afford Payments
If you don’t think you’ll be able to afford your payments once repayment starts, reach out to your lender and ask about potential options to avoid missed payments or default. Leslie Tayne, an attorney specializing in debt relief, says you shouldn’t “scramble at the last minute and try to figure this out.”