Student Loan Forbearance Extended Until January 2023
Borrowers can breathe a sigh of relief after the Biden administration rescheduled the loan payment and interest freeze to December 31st, 2022. Numerous extensions were previously announced as “final” only to be extended further.
The Trump administration first halted the repayments as one of the perks to help citizens in the early days of the pandemic. Most of the perks introduced then have gone, but the student loan forbearance has held. The recent announcement was a reprieve for many Americans struggling with the soaring inflation costs.
The Best Strategy Before the Student Loan Deadline
Now that all signs point to January 1st, 2023, as the start of student loan repayment, you need to make the following consideration to make the most out of these final days.
- Don’t Make Payments
The current 0% interest on a student loan is luring many borrowers into making extra payments. However, it would be wise to hold the money until January 1st, 2023, when repayment resumes. Alternatively, deposit the money in a high-yielding savings account, and you could earn interest within four months. However, if you might be tempted to misuse this money, it would be reasonable to send it to your lender.
- Ask for A Refund
You could ask for a refund if you made payments during the payment freeze. You can utilize the money for the next four months as you await the payment restart. Lenders offer a simple refund process helping you boost your emergency funds. Similarly, you can add the refund to your savings account and earn a higher interest.
- Prepare for January 1st, 2023
After such a long payment freeze, the restart will likely be ugly. The lenders expect numerous queries in January from students seeking to understand the terms. Avoid lengthy waits and headaches by getting your questions answered early.
Before we hit the deadline, ensure you understand your repayment plan, amount, and medium. Also, take early steps to track your progress if you’re working towards forgiveness.
Impact of the Extension on Students Seeking Forgiveness
If you are chasing loan forgiveness, you are a big beneficiary of the loan payment freeze. It’s over two years since these borrowers made payments, but time still counts towards some of these programs. To be safe, ensure you’re ready to resume payments. Also, call your servicer before the end of this year for any issues, clarifications, or review the plan.
Will There Be Another Extension?
Given the reasoning behind the current extension, the likelihood of another extension remains very low. The Biden administration offered the extension to figure out student loan forgiveness. Now that everything is solved, there wouldn’t be a need for further extension.
Besides, the president placed the extension with the November midterm elections in mind. The repayment restart stretches beyond the polls, meaning politics may not suffer from any January 1st reactions.
The Bottom Line
It’s time to seriously think and plan about loan repayment before the January 1st deadline. The factors to consider depend on your borrowing category, income, and payment period.
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