Secretary of Education Miguel Cardona said that despite continuing conversations about student loan forgiveness, federal borrowers should expect to restart payments this February in a Tuesday interview with PBS News Hour.
Cardona said the Department of Education is "working with the White House and with the Department of Justice" on canceling student debt. "And while those conversations continue, it doesn't mean we're taking our eyes off making sure that everything we do at this department is student-centered," he added.
But for the tens of millions of student loan borrowers whose federal student loan payments have been paused since March 2020, it's time to prepare for payments to resume in February 2022. Keep reading to learn more about how you can prepare your finances, from income-driven repayment to student loan refinancing.
If you decide to refinance your student debt, visit Credible to compare offers across multiple lenders without impacting your credit score.
How to prepare for student loan payments to resume this February
About 40% of student loan borrowers said that a longer student loan forbearance period is needed, but that doesn't change the fact that payments are set to resume in a few short months. Here are a few ways you can prepare your finances so you don't default on your college debt:
- Consider refinancing your student loans
- Enroll in an income-driven repayment plan
- Apply for additional student loan forbearance
Browse your options in the sections below to determine the best path for you.
Consider refinancing your student loans
Student loan refinancing is when you take out a new private loan with better terms to repay your student debt. And since private student loan rates are near historic lows, according to data from Credible, now may be a good time to refinance.
Refinancing your student loans to a lower rate may help you reduce your monthly payment, pay off your debt faster and save money on interest over the life of the loan. A recent Credible analysis found that borrowers who refinanced to a longer-term student loan on Credible were able to save more than $250 on their monthly payment — all without adding to the cost of borrowing.
That being said, private student loan refinancing isn't right for everyone. Refinancing your federal loans will make you ineligible for federal protections like COVID-19 administrative forbearance, income-driven repayment and student loan forgiveness programs. So if you're banking on having your student loan debt canceled via a program like Public Service Loan Forgiveness (PSLF), you'll want to avoid refinancing to a private loan.
But if you can secure a lower rate on your debt and aren't planning on taking advantage of federal benefits, student loan refinancing may be a smart move. And since private student loans aren't eligible for these programs anyway, you don't risk losing federal benefits if you refinance your private student loan debt. After all, about 1 in 8 student loan borrowers has private student loans.
You can browse student loan refinance rates in the rate table below and visit Credible to see estimated interest rates tailored to you.
Enroll in an income-driven repayment plan
If you can't afford your monthly federal student loan payment, consider enrolling in an income-driven repayment plan (IDR). An IDR plan limits your monthly payment to 10-20% of your disposable income, depending on the type of federal loans you have.
You can enroll in IDR for free by logging into your account on the Federal Student Aid (FSA) website.
Apply for additional student loan forbearance
Federal student loan borrowers who are unable to resume payments soon may want to apply for additional forbearance. You may qualify for up to 36 months of additional federal forbearance by applying for economic hardship deferment or unemployment deferment.
Private student loan borrowers should reach out to their lenders to see what options are available for deferment. Keep in mind that student loan forbearance programs may vary between private lenders. You can learn more about private student loans and student loan refinancing by reaching out to a knowledgeable loan officer at Credible.
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