Confused About When Your Student Loans Are Due? Here’s What We Know.

On December 4, U.S. Secretary of Education, Betsy DeVos announced that the student loan forbearance period would extend through January 2021. While a one-month extension wasn’t the Christmas miracle many were hoping for, it gives lawmakers time to agree on the next stimulus package or for the new administration to pass loan forgiveness. 

A recent study from Pew found that of the 81% of people who knew about the forbearance period, only 67% thought that protections applied to them. Even though over 90% of the 42 million people who carry student loans have at least one balance that qualifies. 

That got us thinking about how awareness of a topic doesn’t translate into understanding. It’s no secret that the student loan system is sometimes convoluted and confusing; the forbearance period is no different. Here’s everything you need to know. 

Requirements of Covid forbearance

The latest pause is the second extension of the CARES act originally passed in March. Relief is only available to federal loans that are owned by the Department of Education. So not all federally-issued student loans fall under this category — some Federal Family Education (FFELs) and Perkins Loans are excluded. 

If your loan is eligible, relief includes

  • Suspended payments.
  • Period of 0% interest.
  • No collection on defaulted loans. Which includes wage and social security garnishment. 
  • For loan rehabilitation and public service forgiveness programs, the passing months count towards program requirements regardless of payments. 

[ Read: How To Avoid the Tax Bomb on Your Student Loans ]

Private student loans are not included. Unless the lender otherwise states, those with private student loans are still expected to pay their balance each month.

Stop and check your loan status

The same Pew study found that only 61% of people knew when payments would resume. It’s not clear how much longer payments will be paused when the second stimulus package is approved. If you’re not sure of your loan standing, check your eligibility

“Borrowers, servicers, and the Department of Education all have a role to play in making sure the system turns back on smoothly,” says Sarah Sattelmeyer, Project Director of Student Borrower Success at The Pew Charitable Trusts

When payments are set to resume, your provider will notify you. But you have to give them the tools to make that happen. So, if you haven’t checked in for a while, log into your loan portal and make sure all of your contact information is up to date — especially your email. Checking in with your servicer regularly will go a long way in ensuring you aren’t surprised when payments resume. 

When communicating with your loan provider, use the following questions as a starting point to understanding your loan status, as well as detailed steps to keep interests low:

  • What happens to my auto-debit payments if I do nothing?
  • Is there an extended period of time that forbearance can be placed in my account?
  • Will my loans have their interest rate reduced to 0%?
  • Do I need to do anything to reduce them to 0%?
  • Is my account delinquent?
  • How many days do I have to resolve delinquency?

Take the time to revisit your budget

Unless loan forgiveness is passed before forbearance ends, you will have to start making payments soon. Take the time to reevaluate your budget and make necessary changes to ensure your loan payment fits into the mix.

[ Read: Should You Bank on Student Loan Forgiveness in 2021? ]

For many people, the transition into paying loans again will be a difficult one. “Policymakers should be thinking about putting measures in place now to help borrowers smoothly transition back into repayment. Whenever that time comes,” Sattelmeyer advises. 

According to Sattelmeyer, a grace period for those that might struggle after the pause ends,  easier enrollment in income-based repayment plans and raising early red flags for at-risk borrowers are necessary steps. If your employment status has changed, take advantage of the alternate repayment plan options. You’ll want to apply sooner rather than later to ensure you’re approved in time.

The Department of Education offers a few options: 

  • Revised Pay As You Earn Repayment Plan (REPAYE) — Payments are limited to 10%  of your discretionary income.
  • Income-Based Repayment Plan (IBR) — Payments are around 10-15% of discretionary income. Limited to borrowers with a high balance when compared to yearly income.
  • Income-Contingent Repayment Plan (ICR) — Either the fixed amount you would pay over 12 years or 20% of discretionary income — whichever is less. 
  • Income-Sensitive Repayment Plan — This payment plan is limited to those with FFEL program loans. 

You can also think ahead once the payments resume by learning more about refinancing or consolidating your loans. As well as listing your best options based on your credit.

We welcome your feedback on this article. Contact us at inquiries@thesimpledollar.com with comments or questions.

Image credit: 10’000 Hours/Getty Images

Taylor Leamey

Personal Finance Reporter

Taylor Leamey is a personal finance reporter at The Simple Dollar who specializes in personal loans, student loans, mortgages, renters, and financial policy. Her reporting has also been featured at CreditCards.com, Interest.com, Reviews.com, MyMove.com, and elsewhere.

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  • Andrea Perez
    Andrea Perez
    Personal Finance Editor

    Andrea Perez is an editor at The Simple Dollar who leads our news and opinion coverage. She specializes in financial policy, banking, and investing.