Student loan interest set to pick up after January as pandemic break ends
September 25 – Student loan borrowers have not had to repay a dime since the rise of COVID-19.
But time is running out.
There are 26 million federal student loan borrowers, the US Department of Education said, and their COVID-19 flexibility is expected to end after January 2022.
The federal student aid clearinghouse and employees of the department’s loan services have attempted to stay in touch with borrowers through social media and have sent millions of emails.
Some borrowers – around 30% – chose to make payments during the forbearance period, the FSA said in an email.
There is 0% interest on the loans at this time, so all payments go towards reducing the principal.
“Now when things are on hold it’s a great time to keep paying,” said Ethan Stewart, certified financial planner with Centennial Financial Group on Main Street in Johnstown.
He said some clients have paid off their debts faster thanks to forbearance.
Stewart said he recommended setting up an automatic repayment plan, and if the loans are not bundled, he said to focus on paying off the loan with the highest interest rate and then start. to pay the next.
People with stable jobs during the pandemic were able to repay the principal of their loans faster with no additional accrued interest.
But the respite was designed for those who have had unstable jobs due to the pandemic.
The FSA has said that while some federal student loan borrowers likely repaid some of their principal during the forbearance period, all federal student loan borrowers will return to their previous status once student loan flexibilities end.
For example, if the borrower’s account was on cancer treatment deferral before March 2020, then their loans will be repaid on cancer treatment deferral.
If a federal student loan borrower was in a state of repayment, that borrower would revert to a state of repayment after the student loan flexibilities ended.
FSA and Federal Student Loans Service agents have been advising borrowers since the onset of the national COVID-19 emergency that the program has ended.
Specifically, the FSA has regularly engaged with borrowers through email and social media campaigns.
Less than five months into January, the FSA asked loan managers to update their systems and operational structures to prepare for the resumption of payments, including hiring and training new staff to take over the increase in operating hours.
The FSA said it was working with staff to analyze historic, current and future call volume and staffing levels to ensure workers are ready to fully support borrowers when payments resume, said the FSA.
The FSA and Lending Services are developing communications that will remind borrowers of the key steps they can take to prepare to resume repayment. These steps include updating their contact details, using Loan Simulator to identify a repayment plan suited to their current situation, and signing up for direct debit to ensure their payments are made on time.
U.S. Senator Bob Casey, D-Pa., Has said COVID-19 relief for borrowers is essential.
“Americans are in trouble and relieving those with student debt is essential,” he said in an emailed statement.
Casey added that he would continue to support policies that allow borrowers to refinance at lower interest rates and make college more affordable.
“A strong economy needs people who can contribute to the economy,” said the senator.
“Providing assistance to borrowers can help young workers continue to buy property from local businesses, rent or buy newer homes, and otherwise contribute to their community. “
Russ O’Reilly is a reporter for The Tribune-Democrat. Follow him on Twitter @RussellOReilly.