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Pause on Federal Student Loan Repayments Extended Again

Pause on Federal Student Loan Repayments Extended Again

| April 13, 2022

You probably have heard by now that the pause on repayments for federal student loans has been extended yet again until the end of August.  The previous extension was set to expire May 1st.  The government has given you a 4-month reprieve.  What are you going to do between now and August 31st to take control of your student loan debt?

First, log into your student loan account and check your status.  The majority of federal loans are covered in this pause, but there are some federal loans that are serviced by commercial lenders that are not eligible for the pause.

If you’ve stopped making monthly payments during this pause, now is the time to review your current spending and start living like you’re making your monthly payments.  Consider saving the monthly payment amount in your savings account from now until August.  At minimum, this helps you build up your rainy-day savings, but it can also enable you to make a lump sum payment to apply to your principal balance once repayments begin.  If including the monthly payments back in your budget feels like a pay cut, you may want to refine your spending habits to help you live in your new normal before it’s forced upon you.  Could a raise or a side hustle ease the burden of the monthly payments?  Consider investigating all your options to boost your income.   

If you can, restart or continue to pay your student loan payment.  Your loans currently have a 0% interest rate, which means no interest is accruing on your loans.  If you make payments during this pause, the payments may go to reduce the outstanding principal balance.  Note:  confirm with your loan servicer that any payments (monthly or in a lump sum) you make during the pause will go towards your outstanding balance.  Some servicers require special instructions to direct payments to the outstanding balance.

If you got a new job, had a change in income, or got married in the last two years, you may need to revise your repayment plan.  Income-based repayment plans factor in the joint income of married couples, even though the debt is only in one spouse’s name.  A higher income could make you ineligible for income-based repayment plans.  If you got a new job or are looking for one, ask if your employer offers student loan repayment assistance.  More companies are starting to offer repayment assistance as part of their benefits.  Additionally, the CARES Act broadened the eligibility for various forgiveness programs the Department of Education offers.  It may be worth the time to see if you’re in an eligible profession, such as a teacher or an employee of the government or a not-for-profit organization.         

If you’re not sure where to start, reach out to a trusted professional who can create a clear path for you to live your life while paying back your loans.  Even if you’re hoping for another extension on this pause or cancellation of your loan altogether, it’s a good idea to map out a plan for resuming loan repayment if those events don’t materialize.