By Anna Helhoski | Nerdwallet
For 42.9 million student loan borrowers, it’s been 18 months without payment. It ends in October – ready or not.
The interest-free federal student loan payment hiatus, known as forbearance, has been extended three times after it first came into effect in March 2020 to help reduce the financial blow that many borrowers have suffered at the time. aftermath of the pandemic.
But with payments resuming in a few months, the services – the companies that handle student loan payments – are already receiving thousands of calls a day from borrowers seeking help with student loans, according to Scott Buchanan, principal. Executive of the Student Loan Servicing Alliance, a nonprofit business organization for student loan services.
Time is running out for service agents and loan borrowers to prepare for repayment.
While Education Secretary Miguel Cardona has indicated that it is not “out of the question” to extend the loan forbearance beyond September 30, for now borrowers should be prepared to pay. that invoices are due in October days before their exact invoice date).
Speak with your repairman now
Officers expect demand for borrower assistance to increase and may find it difficult to keep up. The refund system has never been disabled before, so no one knows what its simultaneous restart will look like for 42.9 million people.
“We have no directives from the ministry [of Education] what a recovery strategy would look like, ”Buchanan explains. “We are in the period when these plans must be communicated; it can’t wait.
Richard Cordray, the new head of the Department of Education’s federal student aid bureau, told the Washington Post for a June 11 story that restarting payments was “a very complex situation” and said the bureau planned to provide more information to service agents soon. He also said the ministry plans to hold officers accountable by setting rigorous performance benchmarks.
Despite the uncertainty, if you’re worried about your ability to make payments, it’s okay to contact your maintenance agent now to avoid the rush, Buchanan explains. Learn about your best options for handling payments, depending on your situation.
If you are not sure who your repairer is, log into your My federal student aid account to find out. To make sure you don’t miss any notifications, make sure your contact details are up to date on your loan manager’s website and in your StudentAid.gov profile.
Know your repayment options
“Your options are not ‘pay or default’,” says Megan Coval, vice president of policy and federal relations at the National Association of Student Financial Aid Administrators. “There are options in between to reduce payments. No one, including the federal government, wants you to default. “
The default occurs after about nine months of late payment of the federal loan. This can lead to a damaged credit score, wage garnishment, withholding tax refunds, and other finance charges.
- If payments are a challenge: Enrolling in an income-based repayment plan sets payments to a portion of your income, which can be $ 0 if you are unemployed or underemployed. Or you can choose to suspend payments (with interest collection) using deferral or withholding from unemployment.
- If you were in arrears before the break: your loans will be reset to “in good standing”. Making monthly payments on time will help you maintain this status. But if you think you might miss a payment or don’t think you can afford the payments, contact your service agent to sign up for an income-driven plan.
- If you were in default before the break: Contact your loan holder or the education department’s default resolution group to find out how to begin your loan recovery and get your situation back on track.
Find a legitimate resource
Repairers can be your first point of contact, but they don’t have to be your last. You may have other needs that your agent does not meet, such as financial difficulties other than your student loans or legal advice.
Cash-strapped borrowers can find free help with legitimate student loans from organizations such as the Institute of Student Loan Advisors. Other student loan helpers, such as a credit counselor or lawyer, will charge a fee. You can find reputable credit counselors from organizations such as the National Foundation for Credit Counseling.
Financial planners can help, too, but it’s best to seek out one with expertise in student loans, such as a certified student loan professional.
You can find legal assistance, including advice on debt settlement and pursuing bankruptcy, from student loan attorneys or with legal services in your state, as outlined by the National Center for Consumer Law.
If your issue is with your service agent, contact the Federal Student Loan Ombudsman Group, which resolves federal student aid disputes. You can also file a complaint with the Federal Student Aid Feedback Center or the Consumer Financial Protection Bureau.
Legitimate student loan aid agencies will not seek you out with debt resolution offers through unsolicited text messages, emails, or phone calls. Most importantly, you don’t have to pay anyone to apply for debt consolidation, take out an income-based repayment plan, or request a civil service loan forgiveness.
“The strict and quick rule is that the request for [consolidation and repayment] programs are free, ”says Kyra Taylor, a student loan lawyer at the National Consumer Law Center. “I think when people realize what they can do for free, it makes it easier for them to spot scams.”
And don’t fall for a company that promises to cancel your student loans or wait for the government to do so – so far no executive action by President Joe Biden or congressional legislation has been passed. .
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Anna Helhoski writes for NerdWallet. E-mail: email@example.com. Twitter: @AnnaHelhoski.