ALBANY, N.Y. (NEWS10)– The moratorium on Federal student loans expires on January 31, 2021. It means payments will resume on Federal student loans for millions of students and graduates in February 2021.
With severe financial hardships due to the coronavirus pandemic are there other options for borrowers who are unable to afford their payments?
Andrew Pentis is a senior writer at LendingTree, the parent company of Student Loan Hero, and a certified student loan counselor. He said there are other options and borrowers shouldn’t wait for the moratorium to be extended or passage of legislation that would reduce or eliminate student loan debt.
Because defaulting on student loans can be devastating to a borrower’s credit, Pentis suggests they start weighing their options now by contacting their loan servicer or another organization like Student Loan Hero that helps borrowers decide which repayment options are best for them.
Usually, the best option for repayment is an income-driven repayment plan, said Pentis. Deferment or loan forbearance are other options available, but students will still be responsible for paying interest that accrues. There is also an unemployment forbearance program offered by the Department of Education that would allow a borrower to put payments on hold for up to three years, Pentis said.
If borrowers are financially secure, putting extra money on the loan can go a long way in reducing the principal balance. Although there is not much time left until the moratorium on Federal student loans expires, Pentis said it’s a good time to continuing making payments even if they are less than the minimum payment due.
Pentis wanted to impress on borrowers that once the moratorium expires, borrowers who pay less than the minimum payment will be considered in default of their loan.