Will Student Loan Forgiveness be Paid For?

*Not financial advice - your money, your choice*

For many people with student loans, the temporary freeze on interest and payments provided some much-needed relief during challenging economic and pandemic-related times. However, as the expiration date for the student loan interest freeze approaches, it's crucial to prepare for the resumption of interest accrual and explore your options.

In this article, we'll discuss various strategies and aim to answer the problems in the visual (below) to help you navigate the post-interest freeze era and make informed decisions about managing your student loan debt.

Graphic from Prudential

But first, what the need-to-know is on when the interest starts again for student loans and when to start paying them so here are the key dates:

• Payments that were paused at the start of the pandemic will be reinstated as soon as August

• Biden-Harris administration has extended the moratorium on student loans 8 times since the Trump-Pence administration signed the Cares Act in March 2020

• 60 days from June 30th borrowers loan’s will start to accrue interest (August 29th, 2023)

Before diving into specific options, take a step back and assess your current financial standing. Consider your income, expenses, and other financial obligations to determine how much you can afford to allocate toward your student loans. Understanding your overall financial picture will guide you in making the best choices moving forward. If this is new to you, check out this article which outlines some great tools on creating a budget & spending plan.

If you can comfortably afford your regular monthly payments, it may be wise to resume making them as scheduled once the interest freeze ends. Continuing regular payments will help you maintain good standing with lenders and reduce your principal balance more quickly, saving you money on interest in the long run.

With interest rates currently at historic lows, refinancing your student loans can be an excellent option to lower your interest rate and potentially reduce your monthly payments. However, keep in mind that refinancing federal student loans into private loans would make you ineligible for federal loan protections and forgiveness programs. However, of these programs have adjustable interest rates and have seen an increase in interest rates due to the Federal Reserve Bank’s (FRB) economic tightening cycle; so do your research. This article is a great place to start.

Federal student loan borrowers have access to various repayment programs that can help make their monthly payments more manageable. Programs such as Income-Driven Repayment (IDR) plans, which adjust your payments based on your income and family size, can provide significant relief. Research each program's requirements, benefits, and potential consequences before making a decision.

If you work in a qualifying public service job or plan to pursue a career in specific fields, such as teaching or healthcare, you may be eligible for loan forgiveness programs. Explore options like Public Service Loan Forgiveness (PSLF) or Teacher Loan Forgiveness to determine if you qualify and how to maximize the benefits.

If you're unsure about the best course of action, consider seeking guidance from a certified financial counselor or student loan expert. Many financial organizations provide this kind of service free-of-charge because they would like to sell you a financial product like a private student loan. They can provide personalized advice based on your unique circumstances, helping you create a repayment strategy tailored to your needs.

As the freeze on student loan interest comes to an end, it's essential to plan ahead and understand your options for managing your student loan debt. Whether you resume regular payments, refinance your loans, explore federal repayment programs, or pursue loan forgiveness, taking proactive steps will empower you to make progress toward financial freedom.

Remember, every individual's situation is unique, so it's important to evaluate your individual circumstances and seek professional guidance if needed. By staying informed and proactive, you can navigate the post-interest freeze era with confidence and take control of your student loan journey.

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