July 16, 2021
*Updated August 6, 2021
Clara J. Cypull, Bankruptcy Attorney
To assist those struggling financially during the pandemic, the U.S. Government suspended student loan payments, temporarily reduced interest rates to 0% for all borrowers, and stopped collections on accounts in default as of March 30, 2020. Borrowers did not need to do anything to receive these benefits.
As the world moves towards reopening, payments are set to resume January 31st, 2022. The Department of Education indicated that this would be the last extension. Absent action from Congress or the President, borrowers should be ready to resume payments when that date comes.
Here’s what you can do now to prepare.
Determine your monthly payment. Visit the website for each of your servicers or contact them directly.
Explore repayment options. If your payments are not affordable, there are many options for income based repayment plans. For many, applying for these plans can significantly lower your monthly payment. Visit Studentaid.gov. Here you can create an account, review your options, and fill out an application that goes out to all of your servicers. If you were already in an income based repayment plan prior to the suspension, you will need to recertify to continue.
Explore options for forbearance. Additional options for extending the suspension of your student loan payments may be available through your servicers. Contact them directly to determine your options.
Check your accrued interest. Since March 30th, 2020, no interest has been accruing on your student loans. However, if you had accrued interest prior to that date, it will be added to your loan principal when repayment begins. This means you have a higher loan balance when the servicer begins to charge interest again. If you can pay off or pay down the accrued interest balance, you can save yourself some money down the road.
Whenever student loan payments actually resume, it is important to be prepared. If you do not make arrangements with your loan servicers, the lenders are able to garnish your wages, which can set you back even farther. Missed payments can also cause serious damage to your credit score.
If you are worrying about paying your other debts once student loan payments resume, schedule a free bankruptcy consultation now. Bankruptcy may be able to help relieve your debt burden to ease this transition. While bankruptcy does not typically eliminate your student loans, it can help get rid of your unsecured debt which makes student loan payments more bearable.
Theresa A. Peterson Law Office
Our office is conveniently located in Golden Valley at the intersection of Highway 100 and Duluth Street. We realize bankruptcy is a vital and often time-sensitive process, and the initial consultation is crucial to understanding your options. We are observing COVID protocols in the office and will meet with you by whatever means is most comfortable for you.
Sources: https://studentaid.gov/announcements-events/coronavirus
https://www.ed.gov/news/press-releases/biden-administration-extends-student-loan-pause-until-january-31-2022
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