Article written by Mary Metten, Health and Well-being Extension Educator.
Originally published in the Kenosha News.
News, opinions, and growing speculation about what is to come in regard to student loans have been hot topics throughout the year.
There are about 45 million borrowers in the United States that currently carry student loan debt. Of those student loans, about 92% are federal loans owned by the U.S. Department of Education. During 2020, we saw federally owned student loan payments suspended at the beginning of the pandemic, with the payment restart date being pushed out a few times as the year has progressed.
Federal student loan forbearance
Most recently on Dec. 4, the U.S. Department of Education announced an extension of the federal student loan administrative forbearance period, pause of interest accrual, and the suspension of collections activity is now through Jan. 31. The forbearance period was previously due to end on Dec. 31.
This applies to federal student loans owned by the U.S. Department of Education including:
Defaulted and nondefaulted Direct Loans
Defaulted and nondefaulted FFEL Program Loans – Federal only, not those owned by commercial lenders
Federal Perkins Loans – Federal only, not those owned by educational institutions
Now, the U.S. Department of Education is working with federal loan servicers to notify borrowers that current relief measures will continue until the end of January.
Although the different relief measures have been in place the majority of 2020, the date for payments to begin again has changed a few times. A Pew Survey published in November found that 40% of borrowers with suspended loans did not know when their repayment was due to begin again and 58% of borrowers who were aware of and reported paused payments said it would be somewhat or very difficult to afford payments if they had to begin making them again in the next month.
These issues are unlikely to drastically change within a short timeframe. While some of the contributing stressors are currently unavoidable, there are still actions you can take to prepare and ready yourself as much as possible.
Actions to take now
You can visit studentaid.gov to find additional officially communicated information regarding the status of suspension of federal student loans, any future announcements, and information about federal student loan repayment options available to debtors.
If you are unsure who your student loan servicer is for your federal student loans, call the Federal Student Aid Information Center at 1-800-433-3243. This is important information, as your student loan servicer handles all billing regarding the loan.
Consider creating a budget or system to keep track of when repayments begin and how it will impact your current financial standing. Visit fyi.extension.wisc.edu/moneymatters/budgeting/ for more information about starting and using spending plans.
Wisconsin borrowers can get more information about their loans and repayment options based on specific circumstances by calling the Student Loan Debt Hotline at 1-833-589-0750. The Wisconsin Coalition on Student Debt and Ascendium Education Solutions have partnered to bring this free service to Wisconsin residents.
Visit fyi.extension.wisc.edu/toughtimes/covid-19-financial-resources/ for more information about financial resources and programs related to COVID-19.