Student loan bills are coming back. Here’s what you need to know

BY Sydney LakeAugust 19, 2021, 2:00 AM
As college students around the country graduate with a massive amount of debt, advocates display a hand-painted sign on the Ellipse in front of The White House to call on President Joe Biden to sign an executive order to cancel student debt, as seen in June 2021. (Paul Morigi—Getty Images)
As college students across the country graduate with a massive amount of debt, advocates display a hand-painted sign at the Ellipse in June 2021, calling on President Joe Biden to cancel student debt. (Paul Morigi—Getty Images)

President Joe Biden has officially extended the freeze on student loan payments until Jan. 31, 2022. But White House officials say this will be the final such extension. February will mark the end of the student loan forbearance that’s been in place since March 2020, when the COVID-19 pandemic first hit.

Simply put, student loan bills are coming back.

Some borrowers have continued making payments on their federal student loans, while others have redirected those funds to savings or have been forced to use the cash for living expenses while unemployed. No matter what borrowers have chosen to do in the past 18 months, it’s time to prepare for changes that are coming early next year, student loan experts agree.

“I certainly hope that this extension does give people some extra time—if they didn’t get themselves prepared—to be ready,” says Christine Roberts, head of student lending at Citizens Bank. And there are some ways to get ready now for those payments resuming in just over five months.

Consider your options

To begin, Roberts suggests evaluating where your money has been redirected during forbearance. Have you been putting it into a savings account? Or have you been spending it on other necessities or things you want?

“There’s lots of options for people, but I think they need to take a step back and look at that,” Roberts says. Borrowers could consider refinancing to find a lower interest rate and longer loan term, or look into the possibility of consolidating their loans.

Ask yourself this question: Can I make the required payments in January? If not, a good option can be consolidation, or grouping several loan payments into one with one consistent interest rate and one loan term, Roberts says.

Refinancing is another alternative for borrowers who will struggle to make payments when they resume. Caitlin Jones, a recent college graduate, looked at this option as a way to find a lower interest rate and longer term for her four separate payments (including three private loans and one federal loan).

“If I wasn’t refinancing, there would be no way to afford the three separate payments that I originally had with the high interest rates,” Jones says. “Keeping the payments low was my first goal because I knew I wasn’t going to be able to pay such large amounts in a short period of time.” 

Jones worked with Splash Financial, a student loan refinancing marketplace, to find the lower monthly payments—and now she only needs to make one payment on her private loans each month. “For someone like me who has higher student loans, I think it’s definitely the way to go,” she says.

Could my student loans be forgiven?

It’s possible, but the prospect of such reform remains largely unknown. 

There have been a few signals in recent months that debt forgiveness could be on the table. Congressional leaders, including Senate Majority Leader Chuck Schumer, a Democrat from New York, and Sen. Elizabeth Warren, a Democrat from Massachusetts, are vocal supporters of debt cancellation. Plus, the Education Department hired Toby Merrill, a student-debt cancellation advocate and Warren ally. Merrill’s research was used to support Warren’s 2020 presidential campaign proposition to direct the secretary of education to cancel $50,000 of each borrower’s student debt.

But Biden’s plan to support paying off $10,000 per borrower was left out of his most recent budget proposal, so there’s not a clear signal about whether broader debt cancellation is a possibility.

“I think a lot of folks are sitting on the sideline waiting for that to happen, which it may or may not,” Roberts says. “People have to individually weigh out what they think the government will or will not be doing over the next several months.”

Know what’s coming

Roberts reminds borrowers that we’re in an “incredibly low interest rate environment” now, and as inflation continues to rise, then so too will interest rates.

“Now is the time for them to really be looking at their options,” she advises borrowers. “Don’t wait until January when everyone else wakes up. Start now with what your plan is.” 

Jones hasn’t been making payments on her federal student loan during the freeze, but she’s redirected those funds to her larger private loan and her savings account. 

“Having a little bit of savings at least if something were to happen was more of a priority to me rather than paying back the government,” she says. “I’m waiting until they make us pay for them.”

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