Back in March, congress passed an emergency funding Bill, the CARES act, to help stimulate the economy during coronavirus lockdowns. This $2.2 trillion bill provided much needed relief, including sending every eligible citizen a check for $1,200. Another relief it added was temporary pausing federal student loan payments and interest accumulation on those loans. And that student debt relief measure is scheduled to end on January 1st, 2021. So with federal student loan payments due soon, what does that mean for you?
What does the end of the pause on federal student loan payments mean for me?
It basically means that everything will go back to how they used to be. Your student loan payments will be due again and you'll have make payments like you were before March. If you made any payments while your payments were temporarily paused, it will be reflected on your balance. Also, your payments will be the same, whether you made extra payments or not. We know that making payments again can be difficult for a lot of people, especially since unemployment is still higher than it was a year ago. So, what else can you do if you can't make your payments?
If you have been saving or spending more in the last few months, know that these payments will come again and could stress your budget. Now can be a good time to reevaluate your budget.
Alternatives to paying my federal student loans
If you're one of many Americans still struggling and you have federal student loans, you can look at entering an income-driven repayment plan if you aren't already part of one. In one of these plans, you will pay anywhere from 10-20% of your income, and even $0 if you're under a certain threshold. This can be a great option to help you lower your payment if you're still struggling in the current climate. However, these plans can last up to 20 years before forgiving your loan and the loan will continue to build up interest.
If you're working, but still want to lower your payments without joining a income-driven repayment plan, refinancing may be another option for you. If you refinance, you can choose a loan that fits your needs. You can choose a shorter loan with high payments and low interest or to a longer loan with higher interest, but lower payments. This could be a great way to tailor your loan to your situation and save money in the option. If you do refinance, make sure you're ok with losing the benefits of federal loans, such as the option to enroll in a income-driven repayment plan.
You could also refinance your student loans using an income share agreement (ISA) with Defynance. Much like income-driven repayment, you only pay a percentage of your income. However, with Defynance, you don't have to worry about your interest piling up over time. Instead, you will make a set number of payments based off a percent of your income. After you make that many payments, your obligation is done. If you're interested in learning more, visit our site or click here to apply.
