Payments on federal student loans were suspended at the beginning of the coronavirus pandemic in March 2020 as a way to provide much-needed relief for student loan borrowers. But the COVID-19 forbearance period ends Sept. 30, 2021, a deadline that's fast approaching.
Read on to learn more about your options for when it's time to start making payments again:
- Take a close look at your monthly budget
- Apply for federal student loan debt relief
- Refinance your private student loans
1. Take a close look at your monthly budget
While some federal student loan borrowers may have been diligent in saving the money they would have otherwise been spending on their payments, that's not the case for everyone. If you've been spending the extra money during the forbearance period, then you might want to account for your student loan payment in your budget for the next few months. Even if you aren't making the payment, this can help you adjust to the gap in your cash flow and see where you can improve your budget.
Also, check to see if you're still enrolled in automatic payments. This way, you're not surprised when your loan payment is taken out of your bank account.
2. Apply for federal student loan debt relief
The federal government offers a number of hardship programs aimed at helping student loan borrowers keep up with their college debt, including:
- Economic hardship deferment or unemployment deferment: Deferring your student loans pauses your monthly payments. Like the COVID-19 forbearance, interest doesn't accrue so your principal balance stays the same during this period.
- General forbearance: If you don't qualify for the deferment programs above, you can apply for general forbearance to pause your payments while interest accrues. This can be a helpful strategy if you can't afford your student loan payment but it can cost you more money in the long run on interest charges.
- Income-driven repayment plan: Enrolling in an income-driven repayment plan means your monthly payments will be capped based on a percentage of your discretionary income.
3. Refinance your private student loans
When it comes to refinancing federal loans, there are some risk factors to consider such as becoming ineligible for federal protections like the programs outlined above, as well as losing the remaining time in the current federal forbearance period. You'd also risk losing eligibility for any student loan forgiveness measures if those are implemented in the future.
Refinancing your private loans is a smart move right now because interest rates are historically low. You may be able to save money on your monthly payments, which you can put toward paying for your federal student loans.
You can get an idea of current student loan rates in the table below. If you think you can get a lower rate on your private student loans, you can get prequalified without affecting your credit score on Credible's online loan marketplace.
Find out if student loan refinancing is right for you
When considering refinancing your private student loans, think about if:
- You can get a lower interest rate on your new loans
- You can lower your monthly payment or pay off your loans faster
Student loan borrowers who refinanced to a shorter-term loan through Credible saved $17,344 over the life of their loans, on average. You can use a student loan refinance calculator, like this one from Credible, to determine how much you could save by refinancing your private student loans.
And if you're still not sure if student loan refi is right for you, then get in touch with a loan officer at Credible to learn more about your options.
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