Student record

Student loan repayments resume in August: What you need to know

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At this point, the federal student loan moratorium has been going on for more than two years, and it’s unclear what the Biden administration plans to do about it.

Between rumors of student loan cancellations and questions about the possibility of extending the moratorium until 2022, the fact remains that more than 44 million student borrowers currently have no clear indication of what is supposed to happen next.

Below, select details what you need to know about the upcoming August 31 deadline and how the next few weeks could be crucial if you still have student loans to repay.

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The deadline for the student loan moratorium is approaching

At the start of the Covid-19 pandemic, the Ministry of Education froze all federal student loan payments and accrued interest, providing relief to millions of American students during these difficult times.

Fast forward to where we are today, with record inflation weighing on the wallets of so many and some members of Congress calling for massive student loan forgiveness or even complete cancellation to aid economic recovery. .

US voters appear split on the issue, with a recent YouGov poll indicating that 51% of respondents strongly or somewhat support the $10,000 student loan forgiveness, while 38% strongly or somewhat oppose it.

Going forward, the Biden administration is well aware of the implications student loan forgiveness would have, as it is likely to impact the next election cycle. Because of this, it’s likely that some sort of decision will be made before the August 31 deadline.

With that in mind, here are three things to consider if you currently have federal student loans.

1. Hopes of student loan forgiveness are fading

There seems to be a big political divide when it comes to student loan forgiveness and whether or not that should happen. That said, the real issue is within the limits of presidential powers.

In a February 2021 town hall, President Joe Biden admitted unsure if he could waive student debt, even though one of his campaign promises was to eliminate federal student loans for eligible Americans. House Speaker Nancy Pelosi affirmed that sentiment last year when she said he didn’t actually have that ability. If Congress is needed to make the call, Republicans have so far remained adamant about blocking any student loan forgiveness plan introduced by Democrats.

With no separate action taken yet nearly 18 months into Biden’s presidency, student borrowers wonder if loan forgiveness will ever materialize — if executive action is taken, it will likely also face legal challenges .

2. If you are eligible for the Civil Service Loan Forgiveness, apply by October 31

The Public Service Loan Pardon, or PSLF, was designed to help those who continued to work in federal, state, local, tribal, or military government roles, as well as for the Peace Corps, AmeriCorps, and certain nonprofit organizations. profit, by canceling their student loans after 10 years of service.

The program, unfortunately, has been fraught with difficulties, including up to 98% of applicants being rejected, although this is something the US Department of Education is working to improve. The Biden administration is also trying to overhaul the program and wipe more borrowers out of debt, with new measures like the limited PSLF waiver opportunity.

In previous years, applicants had to have a qualifying loan product and make payments for 120 consecutive months in order to qualify for student loan forgiveness through PSLF. Now, until October 31, you can apply for and potentially receive credit for prior repayment periods on loans that would otherwise not qualify for PSLF – prior repayments will now also count towards the 10-year period needed to be eligible. For more details, visit the official Federal Student Aid website.

3. Interest rates are rising, so consider refinancing

The Federal Reserve has tried to tackle the recent record inflation by constantly raising interest rates. However, the existence of higher interest rates also means that loan products, including mortgages, student loans, credit cards and auto loans, are becoming more expensive.

While federal student loan interest rates effectively fell to zero during the moratorium, they will return to normal once payments resume after Aug. 31.

According to the Education Data Initiative, the average interest rate on student loans is 5.8% – fortunately, there are many student loan refinance options that offer interest rates lower than this. Before you consider refinancing your student loans, keep in mind that by doing so, you will lose federal protections and miss any chance for forgiveness or help from a federal agency. Consider refinancing any private student loans you may have now and wait for a decision to be made on the federal student loan moratorium before evaluating refinancing your federal loans.

If you still don’t qualify for a student loan forgiveness program, refinancing your student loans (especially if they’re private loans) may make sense – I actually created my student loans with a private bank and strategically refinanced six times at only 2.25% interest rate with a personal line of credit. By lowering your interest rate, you can keep your loan balance from spiraling out of control.

Here are some of our favorite student loan refinance providers to consider:

SoFi Student Loan Refinance

  • Cost

    No origination fees to refinance

  • Eligible loans

    Federal, private, graduate and undergraduate loans, Parent PLUS loans, medical and dental residency loans

  • Types of loan

  • Variable rates (APR)

    From 2.24%; from 2.37% for resident doctors/dentists (rates include automatic payment reduction of 0.25%)

  • Fixed rates (APR)

    From 2.99%; from 3.12% for resident doctors/dentists (rates include automatic payment reduction of 0.25%)

  • Loan conditions

  • Loan amounts

    From $5,000; more than $10,000 for residential medical/dental loans

  • Minimum credit score

  • Minimum income

  • Authorize a co-signer

Serious student loan refinancing

  • Cost

    No origination fees to refinance

  • Eligible loans

    Federal, Private, Graduate, and Undergraduate Loans

  • Types of loan

  • Variable rates (APR)

    From 1.99% (rates include 0.25% autopay discount)

  • Fixed rates (APR)

    From 2.98% (rates include a 0.25% automatic payment discount)

  • Loan conditions

    Flexible terms between 5 and 20 years

  • Loan amounts

    A minimum of $5,000, up to $500,000 (California residents must apply for a refinance of $10,000 or more)

  • Minimum credit score

  • Minimum income

  • Authorize a co-signer

Laurel Road Student Loan Refinance

At the Laurel Road secure site

  • Cost

    No origination fees to refinance

  • Eligible loans

    Federal, private, graduate and undergraduate loans, Parent PLUS loans, medical and dental residency/scholarship loans, as well as special prices and reduced rates for healthcare professionals (doctors, dentists, optometrists and assistants medical)

  • Types of loan

  • Variable rates (APR)

    From 1.89%; from 2.28% for resident rates (rates include 0.25% autopay discount)

  • Fixed rates (APR)

    From 2.80%; from 3.08% for resident rates (rates include 0.25% autopay discount)

  • Loan conditions

    5, 7, 10, 15, 20 years (but also offers any term less than 20 years, subject to underwriting criteria)

  • Loan amounts

    For bachelor’s degrees and above, minimum $5,000; for eligible associate’s degrees in healthcare, up to $50,000 in loans for non-ParentPlus refinance loans

  • Minimum credit score

  • Minimum income

  • Authorize a co-signer

At the end of the line

The future of student loan repayment is unclear and, unfortunately, borrowers are not given much information to proceed.

Select contacted the Department of Education, which responded with the following statement: “The Department of Education will continue to assess the impacts of the Covid-19 pandemic and the economy on student borrowers. We will communicate directly with borrowers about the end of the payment pause when a decision is made.”

If you currently hold federal student loans, the best thing to do is to assume that your payments will resume – that way, if they do, you’ll be ready. If the government decides to maintain the moratorium or go ahead with some kind of loan cancellation plan, you will be at least as financially prepared as possible for this scenario as well.

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Editorial note: Any opinions, analyses, criticisms or recommendations expressed in this article are those of Select’s editorial staff only and have not been reviewed, endorsed or otherwise endorsed by any third party.