What’s Happening With Student Loans Right Now
- Federal student loan relief has been extended until January 1, 2023.3
- President Biden announced a new student loan forgiveness plan that would cancel $10,000 of student loan debt for borrowers who make less than $125,000 a year, and $20,000 of student loan debt for those who received Pell Grants in college (as of August 2022).4
- Borrowers in default or delinquency on their federal student loans will automatically be returned to good standing (as of April 2022).5
- The U.S. Department of Education discharged $5.8 billion worth of remaining student loans for those who attended Corinthian Colleges (as of June 2022).6
Student Loan Relief
If you’re like most people, your student loans have probably been out of sight, out of mind for a couple of years. But that won’t last forever.
Back at the start of the COVID-19 pandemic, people who had lost their jobs or were furloughed were having a hard time paying their rent—let alone their student loans. So, in March of 2020, the U.S. government passed the CARES Act to make things easier on those who were hit hard financially. This paused federal student loan payments and set the interest rate for federal student loans to 0%.
Just like the pandemic, our economy and job growth has had its ups and downs since then, and student loan relief has continued. The CARES Act has been extended several times over the last few years. Most recently, President Biden extended federal student loan relief until January 1, 2023.
Yes, this may buy you some more time. But it won’t be long before your student loan payment is in your face (and coming out of your bank account) again. And the sooner you’re prepared, the better off you’ll be.
If you’re worried about being able to make your student loan payments once student loan relief ends, you’re not the only one. In fact, 92% of fully employed student loan borrowers are concerned that rising costs will make it harder to afford their student loan payments once they kick back in.7 And a report from the Government Accountability Office found that about 50% of all federal student loan borrowers are at risk for delinquency (falling behind on payments).8
But there are things you can do now to help you get on top of your student loans before January.
How to Prepare for the End of Student Loan Relief
Start paying back your student loans now.
The best thing you can do to prepare for the end of student loan relief is to start making those payments now. We know that sounds pretty weird—why would you pay your student loan payments if you don’t have to? Because the interest alone will eat you alive. And right now, you can keep making those payments and not pay any interest. None. Zero. Zilch. That means your entire payment goes directly toward knocking down the principal amount of your student loans. That’s huge.
Sadly, our State of Personal Finance study found that 6 in 10 people who have student loan debt haven’t made any payments on their loans while payments have been paused.
But now is the time to make some serious progress on paying off your student loans! Once automatic payments start up again and the interest kicks back in, you'll be paying 5.8% (that’s the average student loan interest rate) on a smaller loan balance.9 And the sooner you pay off your student loans, the sooner you can feel that same sense of relief you may have felt the last few years—except you won’t have to worry about them coming back ever again!
Make sure your information is correct.
This tip is mostly housekeeping, but if you haven’t paid on your federal student loans since March 2020, it’s important to make sure your loan servicer has your correct information. Did you get married? Get a new phone number? Move to a new place? It’s a good idea to double-check that your loan servicer has all your correct info on hand before that first payment is due. Because the last thing you want is to be late or default on your student loans over a technicality. Just go to studentaid.gov to view and update your info.
P.S. Don’t be surprised if your loan servicer has changed since you last made a student loan payment. The Federal Student Aid office works with multiple loan servicers, and it’s more common than you may think for companies to transfer loans to another servicer. If that happens, you should get a letter or email letting you know about the switch. And you may need to create an online account with your new loan servicer. Just make sure your payment history and balance are correct, so you’re not stuck paying more than you owe.