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Student Loans are on Pause. Now What?

By Bridget Haile
March 15, 2021

It’s official President Biden has extended the student loan payment freeze and interest waiver through September 30, 2021.

This is big news for the nearly 45 million Americans carrying student loan debt. And while everyone’s story is unique, this loan pause offers some form of relief to the majority of borrowers.

Read on to learn more about this relief legislation, and see what it may mean for your loans.

2020 was a blur. Let’s get up to speed.

In case you missed it, these relief measures have been in effect since March 2020, when the CARES Act offered student loan borrowers a much-needed break.

Originally set to expire in September 2020, that deadline has been pushed back multiple times. By the time payments resume, these measures will have been in place for over a year and a half, which has left many borrowers confused about what (if any) actions to take today.

Even though these measures are temporary, this is the first time in history that the government has enacted student loan relief policies on this level and scale, and it’s made big waves for borrowers across the country.

Here’s why this (really) matters

Even before the pandemic, many borrowers struggled with managing their student loans. Holding student debt has become a major hurdle to building the financial security and stability needed to handle unexpected expenses.

Then 2020 happened. And those once-hypothetical expenses became very real, very fast. But by putting a pause on federally held student loans, this relief package offers borrowers some time to breathe, reassess, and adapt their financial strategies to fit this new normal.

To many borrowers, this relief extension also represents a lifeboat in a sea of uncertainty. Time and time again, student loans have been linked to mental health struggles. According to a 2018 study from Summer and Student Debt Crisis, 86% of respondents said student debt is a major source of stress. One in three said it’s their biggest source of stress.

At a time when the world feels a lot heavier, the pause has given borrowers one less thing to worry about.

Breaking down the relief package

So, what does this mean for your loans? Let’s take a closer look at what this relief extension has to offer.

1. From now until September 30, all federally held student loans are frozen.

The key word here is federally held. Unfortunately, not all student loans fall under that umbrella.

Federal Direct loans and some FFEL, Perkins, and Parent PLUS loans are issued by the U.S. Department of Education and therefore considered to be “federally held.”

Here’s where it gets a bit confusing: not all federal loans are considered federally held. If you took out loans after 2010, they’re probably considered federally held. Still, you may want to double-check to be sure.

Unsure whether your loans are considered federally held? Fear not. With your free Summer account, you can check your loan type, see all your student loans, and explore repayment and forgiveness options all in one place.

2. Monthly payments are on pause and interest is frozen at 0%.

That student loan bill that was once a part of your monthly routine? Yeah, you don’t have to worry about it until payments resume in October. For many borrowers who have seen their incomes reduced due to the pandemic, this payment pause has been a welcomed reprieve.

Plus, even though you may not be making payments, your federally-held loan balance won’t grow during this time. This means you can pick up right where you left off after the relief extension expires.

3. Unfortunately, private loans are not included in these relief measures.

But all hope is not lost. Finding a path toward relief or forgiveness may be more complicated for private loans but it’s not impossible. Private loan borrowers still have some relief options, ranging from refinancing to working with your lender to agree on a more sustainable repayment plan.

4. Suspended payments still count as qualifying payments towards forgiveness programs.

This is good news for the borrowers enrolled in programs like Public Service Loan Forgiveness and income-driven repayment (IDR).

If your forgiveness plan requires a certain amount of consecutive payments, these “payments” of $0 will keep you on track.

5. Just because payments are on pause doesn’t mean you can’t keep paying.

Depending on your loan type and financial status, putting some cash toward your loans may be a wise idea right now.

While interest is frozen at 0%, any payment will go directly toward the principal after any interest accrued has been paid. This will leave you with less interest to pay in the long run.

And with monthly payments on pause, you can also choose to pay on your own time and your own terms. Want to pay at the same time each month? Go for it. Want to hold onto your cash and make one lump sum payment at the end of the relief extension? Sounds great.

If you do decide to hold your payments, you also have the freedom to decide where to put those funds later on: toward your loans, credit cards, emergency savings, or any other expenses.

For the first time ever, paying off your loans can be a “choose your own adventure.” Just do some research first to be sure you’re making the right money moves.

6. Even after the payment pause ends, you may have options to keep your payments low or get on track toward forgiveness.

You may be eligible for repayment or forgiveness plans that you just don’t know about yet. Actually, that’s kind of the whole deal at Summer helping you find the right path for your unique situation and circumstances.

One way to keep payments low is by enrolling in an Income-Driven Repayment (IDR) plan. These plans determine your payment amount based on your discretionary income. If your income is low enough or you are unemployed, you may pay as little as $0 per month. Plus, if you stay enrolled in IDR, you’ll have your loans forgiven after 20 years. (Seriously!)

Moving forward together

The student debt relief extension has given millions of borrowers a chance to pause in the midst of a wild time. Regardless of how this relief extension plays out for you, you’re not alone. And if you need guidance, advice, or even a pep talk, Summer’s team of student loan experts are standing by.

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