Student loan repayment advice, budgeting tools and plans
Student loan repayments will resume on May 1 after a two-year postponement as part of COVID-19 relief.
CONNECTICUT, USA — Editor’s Note: The video above originally aired on March 9.
Eliminate those old budget plans because student loan repayments will start again on May 1.
The Trump administration initially suspended federal student loan payments in March 2020, then extended them until January 2021. President Jo Biden moved the extension to continue it twice, and the Department of Education worried about the effects of a sudden restart of payments, for both students and students. administratively within the department.
The extension of the loan moratorium comes as the decision of whether or not to erase large swaths of student debt is still on the table.
Some Democrats are pushing for massive debt forgiveness. But Biden questioned whether he had the authority for this kind of mass cancellation, and legal scholars differ on this. Earlier this year, Biden asked the Departments of Education and Justice to look into the matter. Officials said work was still ongoing.
With mass rebate still in limbo, for now, it’s time to get ready to start repaying those loans again.
RELATED: Democratic state lawmakers push for student loan repayment program
Student loans can be a drain on our wallets, so if you can, try to pay them off as quickly as possible. Nerd Wallet Funding Company offered some suggestions.
One option to take is to refinance if you have good credit and a stable job. It may be more difficult after unemployment hit millions during the pandemic, and many found new careers.
However, if you are able, you can refinance your student loans faster without making additional payments.
Nerd Wallet said opting for a shorter term can increase your monthly payment, but it can also help you pay off debt faster and save money on interest.
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You can also opt for bi-weekly payments. Again, from month to month, it will be more money, but it will reduce your repayment schedule time and money from your interest charges.
Nerd Wallet also suggests using “found money” as a tax return, if you have side businesses or any other way for other income to end up in your bank account.
Of course, the easiest way, although it may take the most time, is to stick with your normal repayment plan.
But what if you can’t? What if, especially after the last two years of the pandemic, the funds to pay your loans were not there?
If you are having difficulty with a federal student loan, the government student help website has some tips:
You can change your repayment plan if your economic situation changes. The website offers a “loan simulator” that lets you see which plans you might qualify for. It also helps estimate how much you would pay monthly and overall. They suggest doing this before contacting your loan officer.
You can also apply for an income-based plan if needed. According to StudentAid.gov, these plans set your monthly loan payment at an amount that’s meant to be affordable, based on your income and family size.
RELATED: Biden extends pause on federal student loan payments until May 1
If other options do not present themselves, you may qualify for a deferral or forbearance of your federal loans. Currently, all loans are on pause until May 1 due to COVID-19 relief measures. You can learn more about adjournment or abstention here.
But what if you have a private loan? It’s relatively the same strategy.
According to the San Francisco-based financial firm SoFidifferent lenders have their own terms that can trigger a default on a student loan.
The first thing the company recommends is to consider separating your federal loans and private loans, saying that federal loans often come with more protections and options for repayment plans.
SoFi also recommends talking to your lender about alternative student loan repayment plans.
They also say you can refinance, budget, or explore deferment and forbearance options.
SoFi said interest will continue to accrue while private lending is forborne or postponed, and could end up costing more in the long run.
Nerd Wallet also offers similar tips when it comes to private student loans. They also point out that if you have to go the deferment or forbearance route, this should be considered a last option due to the fact that interest will continue to accrue over time.
The presence of sometimes overwhelming student loans can weigh on our minds, especially in this new normal that the pandemic has created, and after not having to pay since March 2020.
There are tools to help people with payment options and what to do if the pandemic has changed your financial situation as payments start again.
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