ALBANY, NY (NEWS10)– The moratorium on federal student loans expires on January 31, 2021. This means that payments will resume on federal student loans for millions of students and graduates in February 2021.
With severe financial hardship due to the coronavirus pandemic, are there other options for borrowers who are unable to meet their payments?
Andrew Pentis is senior editor at LendingTree, the parent company of Student loan hero, and one certified student loan counselor. He said there are other options and borrowers should not wait for the moratorium to be extended or for legislation to reduce or eliminate student loan debt to be passed.
Because student loan defaults can be devastating to a borrower’s credit, Pentis suggests they start weighing their options now by contacting their loan officer or another organization like Student Loan Hero that helps borrowers. decide which repayment options are best for them.
Usually the best repayment option is an income-based repayment plan, Pentis said. Deferral or forbearance are other options available, but students will still be responsible for paying accrued interest. There is also an unemployment exemption program offered by the Education Department that would allow a borrower to withhold payments for up to three years, Pentis said.
If borrowers are financially secure, putting extra money on the loan can greatly reduce the principal balance. While there’s not much time left until the moratorium on federal student loans expires, Pentis said now is a good time to continue making payments even if they are below the minimum payment due.
Pentis wanted to make borrowers understand that once the moratorium expires, borrowers who pay less than the minimum payment will be considered in default of their loan.