The Biden administration announced Wednesday that it will again extend the payment pause on federal student loans as the Covid pandemic heats up.
The moratorium was set to expire on January 31, but advocates and some lawmakers have pressured the White House to give the 42 million Americans with student debt a break until May 1.
"We know millions of student loan borrowers are still coping with the impacts of the pandemic and need some more time before resuming payments," President Joe Biden said in a statement.
Since March 2020, borrowers have had the option to forgo their monthly payments without accruing interest on their debt, and almost all took advantage. Just around 11% of all borrowers are currently in repayment, according to recent data analyzed by education expert Mark Kantrowitz.
While more people are getting back to work, 89% of full-time employed adults with student loans said they aren't financially secure enough for forbearance to end, the Student Debt Crisis Center points out. Meanwhile, 1 in 5 borrowers don't think they'll ever be ready.
Outstanding student debt in the U.S. has stretched beyond $1.7 trillion and the average monthly bill is about $400. Roughly a third of borrowers are currently in delinquency or default.
Biden, who in June canceled loans for some victims of fraud, asked the Department of Justice and Department of Education to review his legal authority to clear student debt for all borrowers via executive action, but there's no public indication whether or when that might happen.
That's why experts say it's smart to keep preparing for when the forbearance ends. Navient, FedLoan, and Granite State announced this year that they will no longer work to collect federal student debt payments, so be sure you understand how the transition may affect you.
Video by Ian Wolsten
"Make sure the loan servicer has your current contact information," says Kantrowitz. "There are going to be lots of notices you'll need to look out for about such things as when your payment due date is going to be, and what your monthly payment is going to be."
If you were signed up for autopay before the pandemic, where your monthly payments are automatically transferred from your bank account to the loan servicer, he adds, "you're probably going to need to reaffirm or confirm that your bank account information hasn't changed."
While it's a plus if you can maintain loan or interest-only payments during the break, Kantrowitz says, it can't hurt to create a repayment plan or revisit one you already have during the time off.
If you anticipate trouble repaying, on the other hand, it's important to "ask about your options."
Requesting an income-driven repayment plan could lower monthly payments based on your discretionary income, but ultimately extend the life of the loan. Unemployment deferment can suspend payments for up to 36 months if you've lost a job and can prove you are in financial distress.
Refinancing some or all of your loans with a private lender could also be an option as it combines your current debts into one new, private loan that could have a lower interest rate.
Whatever route you take, it helps to get organized. Try making a spreadsheet with key information about your loans, including balances, interest rates, and due dates. Experts suggest you set aside part of your income as if it were going toward student debt to get back into that mindset and those spending habits.
"Do some budgeting, just a simple descriptive budget on how much money you have coming in, and what you're spending it on, to make sure you have enough to carve out the amount for the monthly payments during the pandemic," says Kantrowitz. "People may have gotten used to having more money, they're spending may have increased, but now you might have to cut your discretionary spending to make sure you can make those student loan payments."
If you can, he adds, "save the money that you otherwise would be spending on payments the next three months to build a cushion to make it easier to start making those payments in May."
More from Grow:
- Federal student loan repayments restart soon: How to prepare, and what to do if you can't pay
- Government cancels $500 million in student loans for 18,000 borrowers: What that means for you
- This is 'the No. 1 way to get out of debt faster,' student loan expert says — but it may not be right for you