Student loan debt weighs heavily on borrowers as federal student loan payments are set to resume in October 2021. Keep reading to learn if the payment pause will be extended, and learn what to do with your student debt in the meantime. (iStock)

Student loan borrowers haven’t had to make payments on their federal loans since the CARES Act was signed into law in March 2020, but that break is scheduled to come to an end on Sept. 30.

The Biden administration is facing pressure from Democrats to extend the payment pause through March 31, 2022. However, it’s unclear whether the president will actually extend the forbearance period past the September deadline for the 43 million Americans with federal student loans. 

Here’s what to know about when your loan payments will resume and what you should do with your student loan debt in the meantime, such as refinancing. 

You should consider refinancing your private student loans while interest rates are at historic lows, although refinancing your federal loans comes with a few drawbacks. Compare student loan refinance rates on Credible to see if this is the right move for you.

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It’s possible that the student loan payment pause may be extended

Proponents for extending the student loan payment pause cite unemployment and income data as a reason why the forbearance period should be extended. Economic recovery from the coronavirus pandemic is still underway, but the unemployment rate among recent college graduates still hasn’t fully recovered to its pre-pandemic levels. 

Education Secretary Miguel Cardona has said that extending the pause isn’t “out of the question,” and that the Biden administration is looking at data like this to determine its next steps. 

“Obviously we’re going to always take the lead from what the data is telling us and where we are as a country with regards to the recovery of the pandemic. It’s not out of the question, but at this point, it’s September 30.”

– Education Secretary Miguel Cardona at an Education Writers Association conference in May 2021

Democratic lawmakers in the House and Senate sent a letter to President Joe Biden on June 23, urging him to extend the federal student loan forbearance period until March 2022. The coalition is led by Sen. Elizabeth Warren (D-Mass.) and Senate Majority Leader Chuck Schumer (D-N.Y.).

“Failing to extend this pause would not only hurt our nation’s struggling students, but it could also impact future economic growth and recovery,” Schumer said.

Following the lead of prominent Democrats, more than 120 organizations, including the American Civil Liberties Union and the National Consumer Law Center, called on Biden to extend forbearance in a letter to the president dated June 24.

The pressure is on Biden to extend the pause on federal student loan payments for a while longer, but thus far, there has been no guarantee from the Department of Education.

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What to do with your student loans in the meantime

With so much ambiguity over whether or not student loan payments will resume this October, it’s safer to go forward with the assumption that they will. Here are a few things you can do in the meantime to prepare your finances for when loan repayment resumes:

  • Refinance your private student loans while rates are low.
  • Set aside the extra money for when student loan payments resume.
  • Research additional federal loan forbearance programs.

Refinance your private student loans while rates are low

It’s not recommended that you refinance your federal loans now, since doing so would disqualify you from federal protections like income-driven repayment plans, zero-interest forbearance and possible student loan forgiveness. But if you have private student loans, it’s smart to refinance now since rates are historically low.

Student loan interest rates reached record lows in June 2021, according to data from Credible. The average interest rate on a 10-year loan plummeted to an all-time low of 3.50% among borrowers with a credit score of 720 or higher who refinanced their loans on Credible. Rates for 5-year variable-rate loans fell to 2.88%, which is the lowest they’ve been in all of 2021. 

If you’re able to secure a lower interest rate on your private student loans, you may be able to lower your monthly payment, pay off your debt faster and save money on interest over the life of your loan. 

You can see estimated interest rates in the table below. When you’re ready to begin refinancing your student loans, compare rates on an online loan marketplace like Credible to make sure you’re getting the lowest possible interest rate for your situation.

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Set aside the extra money for when payments resume

Coronavirus loan forbearance provided a much-needed break for some borrowers who couldn’t have otherwise made their monthly payments. But forbearance may not have been totally necessary for all borrowers, and it may be possible to increase your savings so you’re prepared for loan repayment to resume.

If possible, you could also consider continuing making payments on your federal student loans to pay down the principal balance while interest rates are at 0%. This can save you money on interest over the life of your loan and help you pay off your college debt faster. 

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Research additional federal loan forbearance programs

The current payment pause automatically applies to all federal student loan borrowers, but there are additional ways to pause your student loan payments upon request. See if you qualify for any of the following federal programs:

  • Unemployment forbearance: Unemployed federal student loan borrowers can request that their loans be deferred for up to 36 months. During this period, interest is typically not charged on subsidized loans, but it is always charged on unsubsidized loans, such as PLUS loans.
  • Economic hardship forbearance: If you’re employed but you’re still having trouble making your federal student loan payments, you can apply to have your loans deferred due to economic hardship. This comes with the same terms as unemployment forbearance, but it may be more difficult to obtain.
  • Income-driven repayment plans: Borrowers who don’t qualify for student loan deferment can consider enrolling in an income-driven repayment plan, which caps your monthly payment at a percentage of your income, generally about 10-20%.

If you’re still not sure what to do with your student loans, get in touch with an experienced loan officer at Credible who can help you figure out the best course of action.

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Have a finance-related question, but don’t know who to ask? Email The Credible Money Expert at moneyexpert@credible.com and your question might be answered by Credible in our Money Expert column.

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