Student loans are like those bittersweet lifelines that help us chase our dreams in the world of higher education. With the skyrocketing costs of tuition these days, student loans have become a necessary evil for many of us. They also come with a hefty price tag attached which is the dreaded repayment phase.
However, the pandemic-era freeze on federal student loan payments is coming to an end this fall after three years. Now, it might be tempting to keep enjoying that payment break, but that’s a game you probably don’t want to play. If you continue to dodge those payments, you could be in for some serious trouble. It could affect your credit score and your eligibility to receive future aid and benefits.
Congress approved a debt ceiling agreement, meaning more than 40 million Americans must start paying up again. Keep in mind that the student loan forgiveness plan is still being worked on. The Supreme Court is expected to decide on some of these issues this week. Come September 1, interest will start accruing, and it will be payment time again by October.
If you don’t make student loan payments once they resume.
When the temporary suspension ends, it’s important to know that if you can’t or choose not to make your student loan payments, you’re putting yourself at risk of delinquency and, ultimately, default. Defaulting can seriously damage your credit rating and even make you ineligible for additional aid and government benefits. If you’re struggling to keep up with the payments, the first step is to check if you qualify for an income-driven repayment plan. This option considers your expenses and determines your payments accordingly. To figure out if you’re eligible, head on over to the Federal Student Aid website here.
Additionally, if you’ve worked for a government agency or a non-profit organization, you might just be eligible for the Public Service Loan Forgiveness Program.
There’s a program called Fresh Start, and it’s there to help borrowers with federal student loans who were previously in default. If you were in default before the payment pause, you’ve got a chance to turn things around and get back on track. You won’t have to worry about those pesky collection processes or having your wages garnished until around August 2024, which is a year after the payment freeze ends. Plus, you can even apply for federal student loans again to finish up your degree. And those defaulted loans are being reported to credit bureaus as current.
If you want to dive deeper into student loans after the freeze, bankruptcy, defaulted loans, or repayment options, reach out to your loan servicer. They’re the ones who can provide you with all the details and guidance specific to your situation. They’ll be able to answer your questions and give you the next steps to take. Another option is to check out the Federal Student Aid website here.