The student loan Pause of payment in the event of a pandemic
Just in case you forgot, there is a student loan crisis in America. The amount owed to the United States is over $ 1.5 trillion. (Yes, that’s with a T!) There hasn’t been a lot of attention paid to this number in 2020 and 2021 due to the COVID-19 pandemic, and for good reason.
In March 2020, Congress passed the Coronavirus Aid, Relief and Economic Security Act, also known as the CARES Act. You probably remember it from the stimulus checks you received.
One aspect of the assistance offered to students on federal student loans was a pause in their payments as well as resetting the interest rate to 0%. Phew! It was a relief. The pandemic has forced us to focus on things more important than student loan repayments, and that’s good.
However, those payments just didn’t magically disappear – they were simply suspended. The idea was to provide financial relief to borrowers so that they could forget about student loan repayments and instead focus on basic expenses. It all sounded good!
One of President Joe Biden’s first acts when he took office in 2021 was to extend the student loan payment hiatus. In August, the US Department of Education announced a permanent extension of the suspension of student loan payments that maintained the suspension of federal student loan payments, a 0% interest rate and a halt to collections on delinquent loans.
Biden extended the pause on student loan repayments until May 1 last week.
It still sounds great! But wait – this whole payment break is set to come to an abrupt end on June 1, 2022.
Student loan collections come to life
In June 2022, the huge student loan collection engine will come back to life. Students with federal student debt will resume receiving bills in the mail. Interest rates are going up. Loans in default since March 13, 2020 will be returned to good standing.
The Student Debt Crisis Center recently released the results of a survey of more than 33,000 student borrowers. Here are some of the highlights:
89% of fully employed student loan borrowers are not financially secure enough to resume their student loan payments
27% say a third of their income or more will go to paying off student debt
4% say they can’t pay their monthly student loan payments or are in default
45% say their financial well-being is currently bad or very bad
It’s a recipe for financial disaster. In fact, there were over 7.7 million federal student loan borrowers who were in arrears at the start of the pandemic. Almost two years later, 93% are still late. It’s not good.
Three tips for getting through the tough days ahead, whether or not you have student loans
Tip # 1: Follow Baby’s 7 Steps
Baby stages 1 and 2 are essential in these tough financial times. Get $ 1,000 in the bank ASAP to start your emergency fund – it’s Baby Step 1. Baby Step 2 is all about paying off all your debts, including student loans, from smallest to largest. You have to get out of debt to get more room in your budget.
Tip 2: be motivated and stick to your budget
A budget is a plan for how you are going to spend your money each month. Seeing all your bills in one place lets you see how far the money you earn will go. If you find that you have more months than you have money, you need to motivate yourself to find extra work to generate more income during this season.
Tip # 3: Become a Student Debt Advocate
Use the frustration and anger of your experiences with student debt to help future generations avoid student debt. The Borrowed Future documentary reveals the dark side of the student loan industry and how the system is designed to work against you. Check it out.
Don’t let the pandemic break put a break in taking control of your money. It’s your money, after all, and you should be the one in control of where it goes.
After winning $ 500,000 in scholarships and earning a bachelor’s and master’s degree from the school of her dreams, Kristina Ellis set out to help students create their own plan for getting a debt-free education. She is the bestselling author of Confessions of a Scholarship Winner and How to Graduate Debt-Free. She is a featured expert in the 2021 documentary Borrowed Future: How Student Loans Are Killing the American Dream. Her work has been featured in numerous media, such as Fox an Friends, The Katie Couric Show, CBN, USA Today, Reuters, Seventeen, and Money. As Ramsey’s personality, Kristina helps thousands of families across the country navigate the complex waters of college and debt-free finance.
This article originally appeared on Fremont News-Messenger: Kristina Ellis: Student Loan Pandemic Payment Pause Ends June 1