Make a Plan for the Return of Federal Student Loan Payments


Illustration for article titled Make a Plan for the Return of Federal Student Loan Payments
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This week, Senate Republicans introduced the HEALS Act, the party’s next stimulus relief bill. While the $1 trillion plan calls for unemployment insurance, direct payments, forgivable Paycheck Protection Program (PPP) loans and more—there’s not much in it for student loan borrowers. As CNBC reports, the HEALS Act calls for simplified repayment plans or an extension of the pause on federal payments—but skips new student loan forgiveness programs.

In March, Congress passed the CARES Act, which offered distressed borrowers the chance to pause federal student loan payments until September 30. With the deadline less than two months away, 40 million borrowers may be in trouble if the next relief bill doesn’t extend suspended payments. Politico reports the Department of Education is already preparing to send impacted borrowers a warning by mid-August.

While some lawmakers are still fighting for additional relief, it may be weeks before the parties strike a deal. Either way, you should start planning for the September deadline. In the meantime, as Forbes reports, there are existing programs that may help.

Economic Hardship Deferment 

If you’re experiencing severe financial difficulties, you may submit a request for an economic hardship deferment. This program allows you to pause federal student loan payments for up to three years.

To be eligible, you must be receiving federal or state public assistance, earning below 150% of the poverty line and working at least 30 hours per week. If you qualify, the government will pay the interest for your subsidized student loans.

Unemployment Deferment

If you’re unemployed and looking for a job, you may apply for an unemployment deferment. You may qualify for this option in six-month increments for up to three years. This program also covers your interest for subsidized student loans—but not unsubsidized loans.

Forbearance

The CARES Act program is a form of forbearance, which allows you to pause federal student loan payments. If you don’t qualify for a deferment, you may apply for federal forbearance or explore private forbearance options with your lender. Federal forbearance may last up to three years, while private forbearance may only provide relief for up to one year, two to three months at a time. During federal loan forbearance, the government doesn’t pay for any interest.

Income-driven repayment plans

If you earn less than 150% of the poverty line, your federal income-driven repayment plan payments may be zero. The government may pay your accrued interest for the first three years of an income-driven repayment plan—and you can see the differences between plans here.