Name: Will Biden extend the student loan payment pause again?
Uploaded: 2021-08-04
Duration: 5 min 31 s
Description: Either way, Fortune's Megan Leonhardt has tips to help borrowers prepare to restart loan payments.

Either way, Fortune's Megan Leonhardt has tips to help borrowers prepare to restart loan payments.

Will Biden extend the student loan payment pause again?

Finance

Fortune’s Megan Leonhardt outlines the timeline of payment pauses and tips ahead of repayment.

to make borrowers repay their debts now would be unfair, would be harsh and in many instances would be cruel. People were thrown off their stride by Covid, give them a chance to recover, wait till the spring. So we've actually had student loan payments on pause for a while now, over a year that actually went into effect in March of 2020 as part of the Cares Act. The interest rates were set at zero and any payments and default collections were deferred and this happened throughout 2020 and then they were set to restart. And the trump administration actually came in and said, nope, we're going to postpone this until january 2021. At that point, biden administration came in and they actually expended the loans. And so at this point you have a situation where the loans are set to go into repayment again, Starting in September of this year, we are also continuing to call on President Biden to use his existing legal authority to cancel up to $50,000 of student debt. Majority leader chuck schumer is not the only one pushing for an extension on student loans as well as actually wiping out student loans. They're pushing for President joe biden to actually use his executive authority to completely wipe out about $50,000 per borrower of student loans. Many advocates say that it would actually help reduce the racial wealth gap. It will also help low income folks, but opponents actually believe that this should go through Congress as a legislative package. And so there's some pushback on whether or not he's actually able to do this using his Executive order authority, We need at least a $50,000 minimum. What will you do to make that happen? I will not make that happen. So far, President Biden has resisted. Democratic lawmakers calls to both use his executive authority and to sit there and wipe out $50,000 in student loan debt per borrower. Instead, he's indicated some openness towards perhaps forgiving about $10,000 per borrower in student loan debt. But again, we still haven't seen any movements in regards to this yet. It's interesting. Both borrowers and actually lenders have both said that they're really not ready for payments to restart. Come the end of september. On the borrower's side, Pew actually found something like two thirds or 67% of borrowers said that they would have trouble and would face financial hurdles if they sat there and had to restart payments. Then on the lender side, we actually saw them respond to lawmakers recently and say that they were not prepared to restart payments either because they're going to have to hire more folks for their call centers. They're going to have to sit there and update some of their systems. And so this is not just a flip a switch and everything goes back to normal situation. There are a lot of hurdles on both sides of this equation that are going to make this a very complicated process. There are a few things that you can actually do now to make sure that things go as smoothly as possible for you while this process is restarting. The first is, you should definitely log on now to your student loan portal and make sure that all of your contact information, your payment information is all up to date. We had a lot of folks actually move during the pandemic. Maybe you changed banks. Maybe you decided that you wanted to split your paycheck into a couple of different accounts. You may also have to sit there and update or recertify your employment. If you are on a public service loan forgiveness program, it's worth going through and calculating your monthly budget now, especially if that's changed over the last year and a half when you cause payments. And then now when you're restarting payments, if you are still experiencing unemployment or decreased income, you may actually be able to request economic hardship or unemployment deferment programs. Refinancing can be a great option for folks. But it also means that you need to do some homework before you get too far into the process. On the plus side, you may be able to streamline your payments. You may actually be able to get a lower interest rate. You can sit there and reduce your monthly payments. All of those things can be really, really helpful. On the flip side, there are some consequences that you need to be aware of heading into it. The biggest, of course is that you're usually going from a federal loans to a private loan. So you may actually lose some of those benefits that you have under the federal loan program. For example, you may sit there and not be able to do an income driven repayment program and if you're on a public service loan forgiveness, that may also go away, keep in mind too, that you may actually sit there and not get a better interest rates. That can sound crazy, but it's true, especially if you have a weak credit for, because a lot of these programs are based on your credit for just make sure that you do as much as you can ahead of time and keep in mind that either are options for you to seek help and definitely get more information as we get a little bit closer and who knows, maybe we'll get another extension.