The Student Loan Deferment Program Is Coming To An End — Here’s What That Means For You
(BrightPress.org) – The student loan forbearance has been extended several times to help current and former students make ends meet while dealing with pandemic-related challenges. As of August, however, these students will have to figure out how to manage their student loan payments. Though unemployment rates continue to drop, many people are still underemployed.
The Basics of Student Loan Deferment
The early stages of the pandemic caused considerable financial struggles for many Americans. In response, the government began a student loan deferment program that paused student loan payments and interest. For months, many students haven’t had to make payments on their loans, allowing them to focus on their other financial needs. That program is expected to end on August 31st.
What Happens When the Student Loan Deferment Program Ends?
As the deferment program ends, a few essential things must be kept in mind.
Interest Rates and Payments
The interest rates and payments on your loan will be the same as when your loan was paused or placed into forbearance unless you have made changes to your loan agreement.
If your loan provider still has your details, your automatic payments will likely resume at their usual schedule.
How to Prepare for Student Loan Deferment to End
With the student loan deferment program ending, making the necessary adjustments to your budget and plans will ensure everything goes smoothly.
1. Confirm your details with your lender.
Since it has been almost two years since the last time people made a payment on their student loans, confirming the essential details is an excellent place to start. Things to check:
- How much are your student loan payments?
- When are your payments due and, if you are making automatic payments, when do they come out of your bank account
- How much you owe on your loan
2. Check your current budget.
Budgets have likely changed considerably due to the rising pandemic-related costs. You might have budget concerns due to changing your living situation (roughly 11% of adults moved during the first year of the pandemic). Inflation might have caused you to change how you approach and prioritize your spending. Look at your budget to ensure your student loan payments fit into it.
3. Talk to your lender about your options.
The end of the student loan deferment program could cause problems for many adults. While you no longer have the option to defer payments, you may still have options that help reduce your financial burden, including:
Reducing Payments Based on Income
Most student loan programs allow you to make payments based on your current finances, but your interest rates may go up.
Refinancing your student loans can help decrease your interest rates and payments. Your financial status may be better now than when you took out the loans, allowing you to get better rates.
If you, like most Americans, are struggling with debt in addition to your student loan payments, consolidating your debt can help you bring down your monthly payments by bringing all that debt into one place.
Student Loan Forgiveness
In some cases, you may even qualify for student loan forgiveness. Students who have made payments for up to 120 consecutive months, who teach at low-income schools for a long time, or who have spent time working at a qualified nonprofit may be eligible for student loan forgiveness.
The end of student loan deferment can mean an increased financial struggle for many current and former students. With proper planning, you can decrease the risk of disaster and set yourself up for overall financial success.
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