President Biden just extended the student loan freeze until May 2022. Here’s how to start planning now

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Student loan borrowers have even more time to organize themselves and prepare for repayment resumption.

President Joe Biden’s administration announced on Wednesday, December 22 that it was extending the break on federal student loan payments until May 1, 2022. This means that payments will not resume until mid-2022 and that rates will not resume until mid-2022. interest will remain at 0%. Biden cited pandemic challenges facing student loan borrowers as the reason for the new extension in a White House press release.

“The extended student loan hiatus will give borrowers more time to transition to repayment in May,” said Robert Farrington, student loans expert and founder of The College Investor. “With the number of changes made to the student loan service, this is a victory for borrowers who could lose the child tax credit, have to file taxes, and so on. By moving to May 1, borrowers have a little more leeway to organize and prepare. “

The moratorium on student loans was originally scheduled to expire on Jan.31, 2022. The latest extension is a bit surprising amid growing concerns about the Omicron COVID-19 variant: The previous extension was previously described as the “final” extension, according to a statement. from the US Department of Education.

Although Wednesday’s announcement made no reference to this being the last extension, or whether more could follow, Biden implored borrowers to start planning for resuming payments now.

“As we take this step, I call on all student loan borrowers to do their part as well,” Biden said in the statement. “Take full advantage of the Department of Education’s resources to help you prepare for resumption of payments, examine options for reducing your payments through income-based repayment plans, explore civil service loan cancellation and make sure you get vaccinated and boosted when you are eligible. “

What to do in light of the extension of Biden’s student loan relief

Student loan balances have effectively been frozen for almost two years, with no interest or payment required on most federal student loans since March 2020. But any student loan debt you had before the COVID-19 pandemic will still be waiting for you. in May.

Pro tip

Experts say you shouldn’t expect your debts to go away in the meantime, because it’s unlikely that there will be mass student loan cancellation – not even the $ 10,000 promised by Biden during the election campaign.

Here are a few things you can start doing now to prepare for your student loan repayment in 2022:

Update your account information

Make sure your information is up to date on your student loan accounts, such as your address, phone number, and email address. Because so much has changed in the past couple of years, you may have changed your address, changed your phone number, or got a new email address. Alerting your loan officer to any major changes will make it easier for you to stay in touch with your student loans.

Prioritize other financial goals

By May 1, focus on areas where you can grow your money, such as paying off high-interest debt, building up your emergency fund, and contributing to your retirement plan. retirement.

Rethink your reimbursement strategy

Take a look at your current repayment plan and see if it still works for your current financial situation. If not, start researching the repayment plan that’s right for you or contact your loan officer for help. Farrington advises dealing with it as soon as possible, as loan officers will likely be overwhelmed next year. “I think there will be a lot of chaos when payments resume,” he recently told NextAdvisor in an interview.

Review the terms and details of your loan

Create a master list of your student loans, including agents, outstanding balances, minimum monthly payments, and interest rates. This way you clearly know what you owe and you can easily check the repayment dates and grace periods for each loan.

Make a budget

We’re still a few months away, but as we near the end of the forbearance period, get an idea of ​​your next payment amount and when it is due in May, so it doesn’t take you by surprise. . . Then see how you can fit it into your current budget, and factor in any changes in your income. You may need to readjust or cut spending in some areas to make room for future student loan payments in your budget.

Have a plan if you can’t afford to pay

If you think you won’t be able to pay your payments once the repayment begins, contact your lender and ask them about your options to avoid missed payments or defaults. Leslie Tayne, a debt relief lawyer, says there is no need to “rush at the last minute and try to figure this out.”

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