close
close

After The Payment Pause And Interest Waiver Are Over, There Are Other Ways To Get Financial Help

Stopping payments and not having to pay interest on student loans will end in the middle of 2023. When it does, what options do you have if you don’t have a job yet and are still having trouble paying back your student loans?

With the payment pause and interest waiver, which started on March 13, 2020, federal student loans held by the U.S. Department of Education no longer have to be paid back. This includes all William D. Ford Federal Direct Loan Program (Direct Loans) loans and some Federal Family Education Loan Program (FFELP) loans (FFELP). For as long as the payment pause lasts, the interest waiver makes the interest rate equal to zero.

On November 22, 2022, the U.S. Department of Education said that it would give the eighth extension. The payment pause and interest waiver will end on June 30, 2023, or 60 days after the lawsuits that are being filed against President Biden’s plan to forgive student loans are settled, whichever comes first.

After the payment pause and interest waiver are over, student and parent borrowers will have several options for getting help with their money.

A few weeks before the end of the payment pause and interest waiver, you should talk to the loan servicer about your options. This will help make sure that your loans will be put in the best option for you. (If you signed up for AutoPay, where your monthly loan payments are automatically sent to the lender, you should contact the loan servicer to update your bank account information even if you plan to start making payments again.)

Federal student loans can be put off or put on hold.

Delay because of economic hardship. Borrowers can get an economic hardship deferment if they are on public assistance (like TANF, SSI, SNAP, and state general public assistance), volunteering for the Peace Corps, working full time and making less than the federal minimum wage ($7.25 per hour), or if their income is less than 150% of the poverty line.

Unemployment Deferment. If a borrower is getting unemployment benefits, they can get the unemployment deferment. If they are unemployed and looking for a full-time job, they are also eligible. Borrowers can’t have turned down any full-time job, even if they are overqualified for it.

Forbearance. The loan servicer can give a general forbearance if they want to. General forbearances are usually given to borrowers who are having trouble paying their bills. Borrowers whose student loan payments are more than 20% of their gross monthly income must also take a forbearance.

During a deferment or a forbearance, the borrower does not have to make payments. Both deferments and forbearances can last up to three years. During a deferment, the federal government pays the interest on federal loans that are being subsidized, but not on loans that are not being subsidized. During a forbearance, neither type of loan’s interest is paid by the federal government. If interest isn’t paid as it builds up, it will be added to the loan balance at the end of the deferment or forbearance period.

Borrowers who are still in school and going at least half-time can get a delay on their payments while they are still in school. After they graduate or drop below half-time enrollment, they’ll have 6 months before they have to start paying back their loans.

Federal student loans can be paid back based on income.

An income-driven repayment plan is another way to get help with money problems.

If the borrower’s income is less than 150% of the poverty line, their monthly loan payment will be $0 under the income-based (IBR), pay-as-you-earn (PAYE), and revised pay-as-you-earn (REPAYE) repayment plans. Under the income-contingent (ICR) repayment plan, the borrower won’t have to pay anything each month if their income is less than 100% of the poverty line.

If your income has changed, you can ask the person who handles your loan to recertify it before the annual date.

During the first three years of an IBR, PAYE, or REPAYE loan, the federal government pays the interest that has built up but hasn’t been paid. Under REPAYE, the federal government pays half of the interest that has built up on subsidized loans but has not yet been paid.

Under REPAYE, the federal government pays half of the interest that has built up but hasn’t been paid on unsubsidized loans for the entire length of the loan’s repayment term.

Program for a fresh start

The Fresh Start program is a new one that helps people who fell behind on their federal student loans before the pandemic. Under the new program, a borrower will once again be able to get federal student aid, such as Federal Pell Grants and Federal Work-Study. Also, borrowers have a year after the student loan payment pause ends (sometime in 2024) to sign up for a repayment plan, including the income-driven repayment option. You can find more information about the program at U.S. Department of Education – Federal Student Aid.

Choices for private loans for college

The payment pause and interest waiver are not available for private student loans. But if you are having trouble making your payments, most lenders have programs that can help. If you are having trouble paying back your private student loans or think you might have trouble in the future, talk to your lender or loan servicer about your options.

Leave a Comment