After nearly 2 years of COVID-19 student loan relief, the deadline for reinstating student loan payments is steadily approaching. For struggling borrowers these impending payments can be very stressful and worrisome. A recent survey from the Student Debt Crisis Center found 89% of borrowers feel they were not prepared to restart payments on Feb. 1 — before the latest extension was announced.
Due to the most recent variant of COVID-19, the omicron variant, the Biden administration decided to extend the federal student loan moratorium to May 1, 2022. But even with this 90-day extension, the freeze is bound to come to an end, and the time to start weighing your options for repayment is now.
In This Article
What Is a Student Loan Moratorium?
A student loan moratorium refers to temporarily putting federal student loan repayments on hold, while also suspending loan interest. This pause on student loan payments is usually done in extraordinary circumstances, such as the stressful financial situation caused by the COVID-19 pandemic.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act included a series of provisions aimed at helping Americans relieve some of the burdens caused by the pandemic. Among them was the COVID-19 emergency relief for federal student loans, which allowed borrowers to suspend payments. That relief has been extended several times since the passage of the CARES Act, with the latest extension lasting through May 1, 2022 — which could be the final extension of the relief.
What Are My Options Once the COVID-19 Student Loan Pause Comes to an End?
Now that the COVID-19 emergency relief for student loans is coming to an end, it’s time to start pondering your options for repayment. As you prepare for payments to resume, look at opportunities to lower payments such as income-based repayment plans, and explore public service loan forgiveness programs and forbearance options.
To support a smooth transition back into student loan repayment, consider some of the following approaches:
Look Into Student Loan Forgiveness Programs
There are government-sponsored programs that offer student loan forgiveness for those who meet specific qualifications. One of the most popular student loan forgiveness options is the Public Service Loan Forgiveness (PSLF) Program, which promises forgiveness of federal student loans to government and qualifying nonprofit employees. Eligible borrowers can have their remaining loan balance forgiven after making 120 qualifying loan payments.
Some other loan forgiveness programs to look into include:
- Teacher Loan Forgiveness Program —Teachers employed full-time in low-income public elementary or secondary schools may be eligible for Teacher Loan Forgiveness after working for 5 consecutive years. If you qualify for this relief, you can receive up to $17,500 in loan forgiveness, depending on the subjects you teach.
- Nurse Corps Loan Repayment Program — If you’re a licensed registered nurse, an advanced practice registered nurse, or a nurse faculty member with qualifying nursing debt, you may be eligible for the Nurse Corps Loan Repayment Program, which pays up to 85% of qualified nurses’ unpaid college debt.
- Military student loan forgiveness — Military personnel in the Army, Navy, Air Force, National Guard, and Coast Guard may qualify for their own loan forgiveness programs.
- State-sponsored repayment assistance programs — Licensed teachers, nurses, doctors, and lawyers in certain states may be able to take advantage of programs to assist with student loan debt relief.
These are just some of the many loan forgiveness programs available for student loans. Do your research and find the ones you qualify for and apply.
Apply for an Income-Driven Repayment Plan
Income-driven repayment (IDR) plans are designed to make your student loan debt more manageable by reducing your monthly payment amount. These types of plans allow borrowers to adjust their monthly payment requirement according to their income. There are 4 main income-based repayment options:
- Revised Pay As You Earn Repayment (REPAYE)
- Pay As You Earn Repayment (PAYE)
- Income-Based Repayment (IBR)
- Income-Contingent Repayment (ICR)
Each of these plans requires you to pay a percentage of your discretionary income for 20 to 25 years. At the end of the repayment period, any remaining loan balance is forgiven. To qualify for income-driven repayment plans, you must have eligible federal student loans and recertify your income every year.
Request Student Loan Forbearance or Deferment
While student loans are currently in forbearance, this won’t be the case for much longer. So if you need more time to repay your loans after the federal pause ends, you’ll have to ask your lender to put your loans into either forbearance or deferment. Loan forbearance allows you to postpone monthly payments for specific periods but, depending on the forbearance program, interest on your loan may still accrue.
In contrast, loan deferment is a federal repayment program that allows you to pause or reduce your student loan payments for up to 3 years. Depending on the type of loan you have, you may or may not be responsible for interest charges that accrue on your loan. For both forbearance and deferment you will need to apply with your loan servicer and meet eligibility requirements.
Ask Your Employer About Student Loan Repayment Help
Some employers are beginning to offer student loan debt repayment help to their employees. One way employers are doing this is by offering tax-free contributions to an employee’s student loans. One provision of the CARES Act allows employers to make payments of up to $5,250 tax-free toward employees’ student loans until 2025. This means an employer could offer an employee a fixed monthly payment or contribution toward eligible education expenses outside of the employee’s gross taxable wages.
Another way companies are helping with student loan debt include implementing a matching program to employees’ retirement plans for every payment they make to their student loan debt. Ask your employer what programs and contributions they have in place to help relieve the burden of student loans.
Consider Refinancing Your Student Loans
Refinancing your student loans could qualify you for a lower interest rate, saving you money in the long run. You can also refinance multiple loans, combining them into one single loan to simplify repayment. Before going down this path, it’s important you understand that refinancing federal loans converts them to private loans. As a result, you’ll lose access to federal loan protections such as forgiveness programs and repayment plans.
Who qualifies for student loan forgiveness?
Depending on the type of forgiveness program you are interested in, qualification requirements will differ. Most government-sponsored programs will set requirements related to your occupation, length of employment, loan type, and so on.
To learn if you qualify for a student loan forgiveness program contact your loan servicer or the forgiveness program you are interested in.
Will student loans be forgiven through executive action?
As of this publishing, there haven’t been any advancements toward implementing broad student loan forgiveness through executive action. But the Biden Administration has repeatedly reiterated that the president is striving to sign a bill offering $10,000 in federal student loan forgiveness to all borrowers.
Explore all your options for repaying your student loans and choose what’s right for your situation. This is especially relevant if your financial situation changed during the COVID-19 pandemic. Now is a great time to think about whether you’re on the best repayment plan for you and how to best manage your upcoming payments.