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FSA braces for ‘unprecedented task’ of resuming student loan payments after forbearance

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The coronavirus pandemic has caused a payment break on federal student loans, but this temporary relief has a definitive end date of January 31, 2022. Find out how you can prepare for the resumption of payments in February. (iStock)

Federal student loan payments have been suspended since the enactment of the CARES Act in March 2020, but the suspension of loan payments ends in just a few months.

The Federal Student Aid Office (FSA) is now preparing for the “unique and unprecedented task” of paying off 25 million borrowers, FSA COO Richard Cordray told a conference on Sept. 16, according to prepared remarks obtained by Politico.

Cordray mentioned that the stakes are “extremely high” for borrowers who rely on COVID-19 emergency relief measures as a lifeline. “This is a watershed moment, and it is important that we do it right,” he said.

Much of this is a communications campaign that includes a series of emails sent directly to borrowers, social media posts, and updates from the FSA website. The goal is to avoid delinquencies and delinquent loans when the payment break ends.

“At a time when so many people struggle – with their health, their jobs, their finances – we cannot overwhelm them with poor execution when repayment returns.”

– Richard Cordray, FSA Director of Operations

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No matter what the FSA and the Department of Education do to prepare for the resumption of payments, it doesn’t change the fact that many borrowers are still not ready for the end of the forbearance. In fact, 40% of borrowers said in a recent survey that they need the federal student loan deferral extended beyond February 2022.

Read on to find out how you can apply for additional forbearance, enroll in an income-based repayment plan (IDR plan), or lower your student loan payments by refinancing. If you decide to refinance, compare the offers of several private lenders without affecting your credit score on Credible.

How to prepare for the resumption of student loan repayments

The final federal student loan forbearance extension runs through January 2022, which means payments will automatically resume in February 2022. Here are some steps you can take over the next few months to prepare for the end. abstention.

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Refinance at a lower rate to reduce your monthly payments

Refinancing a private student loan is when you take out a new student loan with better terms to pay off your current student loans. You may be able to lower your monthly payments, pay off your debt faster, and even save money on interest over the life of the loan by refinancing at a lower interest rate.

Student loan rates are near historic lows, according to data from Credible, saving borrowers thousands of dollars on their student loans by refinancing.

There is a caveat: refinancing your federal loans into a private student loan makes you ineligible for federal protections such as income-tested, forbearance, and student loan forgiveness programs. It may not be worth refinancing at a lower rate if you are considering applying for one of these federal benefits.

You can browse student loan refinance rates from real private lenders in the table below. Visit Credible to see free student loan refinancing offers tailored to your needs.

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Join an income-based repayment plan

Federal student loan borrowers may be allowed to limit their monthly student loan payments to a portion of their income by signing up for income-based repayment (IDR). The FSA offers four different IDR plans, depending on the type of federal student loans you have:

  • Reimbursement plan revised as you earn (REPAYE plan)
  • Pay As You Earn Reimbursement Plan (PAYE Plan)
  • Income Based Repayment Plan (IBR Plan)
  • Income-based repayment plan (ICR plan)

Your student loan payments will be capped at around 10-20% of your discretionary income depending on the type of IDR plan you have. View qualifications and sign up for an IDR plan on the FSA website.

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Request additional abstention in the event of economic difficulties

At the end of the federal student loan forbearance period, you may be eligible for an extended deferment period of up to 36 months through the Department of Education. Apply for postponement of unemployment Where postponement of economic difficulties on the FSA website.

You can also apply for forbearance on your private student loans, but keep in mind that each lender sets their own parameters and eligibility requirements for forbearance. Learn more about student loans, including forbearance and refinancing, by contacting a knowledgeable loan officer at Credible.

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