You should not feel happy now that your Federal Student Loan Payments have been paused; they will be back. At present, there is no activity in regards to your Student Loans, but you will need to watch the news as generally this means “pay attention.”
From stimulus bills, executive orders, and constant press coverage; student loan borrowers have been riding a financial roller coaster. Each following month you prepare to pay again, but then the following month you discover you’ve been granted another extension.
Firstly a pause or halt was initiated by the government on federally applicable, federally owned Student Loans which included a rate of 0% interest charged and a monthly payment of $0, to come under the Cares Act and extended pursued to future months. Each time repayment was to begin, it again would be further postponed.
While a one month extension may not appear as much of an event; in actuality, without it, The new payments could have been due at the same time as Christmas which would create large amounts of missed payments, stressed students and poor credit due to the huge number of borrowers missing payments when Christmas would typically occur.
A new presidential administration taking office meant many people expected another extension before the deadline as well (and rightfully so). Historically speaking, major transitions usually result in changes to existing policies (especially when millions of borrowers are affected).
However, the bigger risk than when payments resume again is all of the behind-the-scenes activity while everyone is focusing on the pause.
If you have ever gone into your account to make a payment and seen company names like Navient, Nelnet, or Great Lakes, these companies are not lenders. They are Loan Servicers. They manage billing, customer service, and payment processing for the U.S. Government.
Once the Loan Servicer changes for an existing loan–the autopay settings and Bank Authorizations do not follow. Therefore, if/when payments begin again and there has not been an Autopay re-authorization with the new loan servicer, a payment could be missed without the borrower even knowing.
A late payment can hurt your credit score for up to 7 years.
At one point, the Department of Education was planning a large-scale servicer transition. However, during a time when it was smart to extend existing contracts to avoid potential chaos in the service of borrowers due to the COVID-19 pandemic, they decided it would be more prudent not to transition all servicers at once while borrowers were being reinstated. The financial confusion to the nation would be tremendous.
One large servicer called Cornerstone Education Loan Services, has decided to withdraw from their federal loan servicing agreement, transitioning over a million borrowers from their accounts to a new servicer.
If you are one of those borrowers, you will need to verify the following:
- The identity of the new servicer for your account
- Creation or update of your online account
- Re-input of your banking information to establish automatic payments
- Confirm all of your correct contact information
Don’t have faith that the systems worked without issue; verify.
The 0% interest rates and the $0 payment requirements provided borrowers with a short period of time to catch their breath, with no accrued interest and no required paymentbi out of cash. Many households could then utilize those funds for necessities or for savings for emergencies during these uncertain times.
Restarting payments after an extended time will feel shocking, but even if you did know that it was only temporary.
Will there be any forgiveness? Will there be new extensions? Possibly. There have been discussions about executive powers related to student loans and forgiveness for some time now. Relying solely on this speculation for planning is a gamble.
Therefore, make plans on the assumption that payments will begin again and plan for them like payments will begin again! If another extension or delay happens, then you’ve already made your preparations instead of scrambling around to make preparations when the time comes!
To start, log into your loan account, make sure your contact information is up to date and check who your loan servicer is. If you had a loan with Cornerstone, be sure to confirm they transferred your account as they intended.
Next, look at your budget. Will you be able to manage the payment when it starts up again? If you are not in a position to pay your loan, you may want to consider income-driven repayment plans before you start making late payments.
If you have been lucky enough to maintain your income through the pause, consider placing the amount you would have paid into a savings account. This will help you to have a cushion) when your payment begins again; otherwise it can feel like being hit in the stomach when payments begin again.
Your student loans are still there just as they were before the pause happened!) The students loans have not gone away; they have just been silent for an extended period of time.
The best thing you can do now is to not try and guess how the policy makers will move. Make sure that you are not the one without a chair when the music stops playing.
Too many times people put themselves into a debt situation without realising it.
