You should expect these 4 things to happen if your student loans aren’t suspended again.
Here’s what you need to know – and what it means for your student loans.
In one letter to President Joe Biden, a group of US senators – including Elizabeth Warren (D-MA) and Chuck Schumer (D-NY) – want student loan relief extended beyond September 30, 2021, the expiration date planned. The Cares Act – the $ 2.2 trillion stimulus package – suspended federal student loan payments, set federal student loan interest rates at 0%, and stopped collection of defaulted student loans. President Donald Trump and Biden have each extended this student loan relief to help student loan borrowers. Biden also extended this student loan relief to 1.1 million student loan borrowers with FFELP loans. The US Department of Education estimates that student loan borrowers will get more than $ 90 billion in student loan cancellations during the Covid-19 pandemic through this student loan relief. If Biden doesn’t extend student loan relief for at least six months – until March 31, 2021 – senators say at least 4 bad things could happen:
1. Student loan borrowers will default on their student loans
Senators note that one million student loan borrowers fail to repay their student loans – every year. The default on student loans at this rate occurred before the Covid-19 pandemic. Senators say more student loan borrowers could default in the future – even though Biden has now canceled $ 3 billion in student loans since becoming president. Why? The negative impact of Covid-19, unemployment and other financial hardships could make it difficult for student loan borrowers to repay their student loans and make ends meet. This could adversely affect the credit scores of student loan borrowers and harm their credit.
2. Student loan repayments will hurt the economy
Senators say restarting student loan payments now will hurt the economy. Probably, the senators mean that if student loan borrowers have to pay off their student loans now, they will have less discretionary income. If they have less discretionary income, they may be less willing to spend money in their local economies and support local businesses. This global impact could harm the entire economy, imply the signatories. Warren and Schumer made similar arguments about the large-scale cancellation of student loans. They say canceling student loans would stimulate the economy and help student loan borrowers have extra income to pump into the economy in addition to saving for retirement, buying a house and starting a family. .
3. Student loan payments will take place during foreclosures, evictions and no unemployment benefits
Senators argue that not extending the student loan payment hiatus is bad for the economy, but it is also bad timing. For example, during this summer and fall there could be a wave of foreclosures, evictions and other potential financial hardship. Why? As of June 30, 2021, in the absence of any extension, the federal moratorium on seizures and evictions is expected to expire. This means that 8 million homes could be foreclosed or evicted from next week. In September, federal unemployment benefits from the US bailout are expected to expire. The combination of potential financial hardship would only be compounded if student loan borrowers were also to start paying off their student loans again, according to the signatories of the letter.
4. Student loan managers will fail student loan borrowers
Senators are skeptical of student loan managers and their ability to properly process student loan payments. They imply that student loan managers have not been held accountable or are not supporting student loan borrowers as much as they should have been. Some critics have claimed that student loan services let you down during the Covid-19 pandemic. Senators are concerned that student loan managers may be ill-prepared to restart student loan payments and enrollment in income-tested repayment plans after September 30, 2021. If there is no extension of this student loan relief, the United States Department of Education, in coordination with student loan managers will send you correspondence regarding student loan repayments as of October 1, 2021. You must also update all student loan accounts. automatic payment and make sure you understand your monthly payment and your student loan balance. You can contact your student loan manager if you have any questions about your student loans or your student loan repayments.
Biden could extend student loan hiatus beyond September 30, 2021
While there are no guarantees, Biden could extend the break in student loan payments beyond September 30. For example, Biden could extend the student loan payment hiatus until Dec.31, 2021. In testimony to Congress last week, US Secretary of Education Miguel Cardona said discussions about a possible extension were in progress. “We are continuing conversations about whether [September 30, 2021 is] the best time [to end the pause on student loan payments]”Cardona said.” No announcements today, but we continue to have these conversations. ”
If student loans are suspended or resume on October 1, you still need a student loan game plan. Here are some smart options to save money: