June 23, 2021

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How to Plan for the End of Student Loan Forbearance

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Photo: Jack Frog (Shutterstock)

The good news is the federal student loan payment freeze has been extended through Feb. 1, which gives borrowers some additional breathing room. However, since additional student debt relief beyond that remains uncertain, you should start planning to making those payments again beginning in February.

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Restarting payments

As long as you’re set up for automatic transfers, your payments will simply pick up where you left off. However, just to be sure, contact your loan servicer and confirm the payment due date, and that your contact and banking information are up-to-date, as well. (Note that the loan freeze does not apply to private student loans).

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You don’t have to begin making payments until February, but that doesn’t mean you can’t do so. You can pay your student loan now, and save a few bucks in the long run by paying down your principal without paying interest.

What if you can’t pay? 

If you’ve lost income or lost your job over the last several months, ask your provider about other deferment or forbearance options, which include:

  • Unemployment deferment: If you can’t find work, you might qualify for deferrals in six-month increments for up to three years. This program also covers your interest for subsidized student loans, but not unsubsidized loans.
  • Economic hardship deferment: This program allows you to pause federal student loan payments for up to three years, during which the government will cover the interest for your subsidized student loans. To qualify, you must be receiving federal or state public assistance, earning below 150% of the poverty line, and working at least 30 hours per week.
  • Forbearance: When you don’t qualify for a deferment based on economic hardship, you may apply for federal forbearance or explore private forbearance options with your lender. A federal forbearance can last up to three years, while a private forbearance will be far less than that, perhaps just two to three months at a time. Unlike a deferment, the government won’t cover any of the interest your loan.
  • Income-driven repayment plans: Income-driven repayment plans can provide affordable monthly payments for borrowers based on their taxable income and family size (if you earn less than 150% of the poverty line, your federal income-driven repayment plan payments may be zero). If you’re already on an IDR plan and making less money now, ask your lender about re-certifying your income before the IDR kicks in again.

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For more information on these options (and other specialized deferments), click here.

Is there more student debt relief in sight? 

President-elect Joe Biden could extend the suspension of monthly student payments for federal loans once he takes office in 2021 via an executive order, but he hasn’t committed to that option, either. And debt forgiveness legislation isn’t likely to pass if Republicans retain their majority in the Senate (which depends on the results of the Georgia runoff elections in January).

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General-purpose relief checks are a contentious part of ongoing relief bill negotiations too, and it’s not yet clear whether it will be part of any legislation, and if so, for what amount. Therefore, it’s wise to plan for the worst case scenario and assume that student loan repayments will indeed restart in February.

Lastly, if you’ve had student debt for years, you might be eligible or currently enrolled in the Loan Forgiveness Program, for which payments were also frozen by the CARES Act. For more information, check out this Lifehacker post for more on what your options are while debt repayment is paused.

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