Some private student loan lenders are pushing President Joe Biden’s administration to urgently resume student loan payments and not consider another extension as the May 1 end to federal forbearance approaches, calling the payment pause “a wasteful and unfair subsidy.”
The student loan payment pause, which was last extended on Dec. 22, 2021, is set to end on May 1. Its relief measures – for eligible loans – include a 0% interest rate and stopped collections on defaulted loans, in addition to the general payment suspension, according to the Department of Education.
According to a new Politico report, some private lenders are reporting losses and “vigorously lobbying” for a payment resumption. This comes as White House Chief of Staff Ron Klain said during an episode of “Pod Save America” that Biden is “going to look at what we should do on student debt before the pause expires, or he’ll extend the pause.”
Student loan borrowers could potentially reduce their monthly payments by refinancing their student debt. Visit Credible to find your personalized rate without affecting your credit score.
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Private lenders draft copy to pressure White House to resume student loan payments
SoFi Technologies and CommonBond – two companies that provide private student loans – wrote in a draft of language for the next government funding package that extending the payment pause is “costly and inefficient,” according to the Politico report.
In fact, SoFi told investors in early March that its profits are expected to drop significantly in Q1 2022 – by $ 20 million to $ 25 million.
The companies argue that the sweeping payment pause is a wasteful and unfair subsidy to borrowers who don’t need it, and they’re warning it will further exacerbate rising inflation, “the article states.
Contrastingly, Sen. Patty Murray recently called on Biden to extend the payment forbearance period. Murray, D-Wash., Said that the pause provides borrowers with “much-needed relief” amid an “unacceptable” loan system.
“I have heard horror stories from borrowers about hours-long phone calls with their student loan servicers trying to get questions answered, or reading through pages of fine print to figure out the best repayment program or how to consolidate loans,” she said.
As the end of the student loan payment pause draws closer, private loan borrowers that haven’t been affected by the federal forbearance period could possibly lower their monthly payment through refinancing. Visit Credible to compare multiple lenders at once and choose the one with the best interest rate for you.
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3 ways borrowers can prepare for when student loan payments resume
According to a survey from the Student Debt Crisis Center, the majority of students (93%) are not prepared for the resumption of student loan payments. Of the more than 25,000 students surveyed, 27% said they would never again be financially ready to make payments, and 85% said they’re reliant on the pause in payments.
There are several ways, though, that student loan borrowers can prepare for the resumption of payments on May 1, should President Biden choose not to extend the payment pause again:
Begin making your payments now
Borrowers are not required to make student loan payments during the federal moratorium. However, borrowers are encouraged to continue trying to make payments now.
In fact, any payments made now will go toward the principal loan amount, with no money going toward interest. Making payments before they’re required can help borrowers start putting the student loan payments back into their budgets. And while the payment pause is in effect, borrowers can also receive a complete refund of any payments made.
Start working payments into your budget
If you are unsure about making your full student loan payments right now, you can also begin a softer approach by taking the money you would pay toward the amount and putting it in savings. This will ensure you’re budgeting for the payments as you prepare for payments to resume.
At the end of the month, you can either put that saved money toward your student loan, or keep it in your savings account in case your budget gets tight after the payment pause ends.
Refinance your student loans
Refinancing private student loans may not be the best choice for everyone, since they won’t qualify for an income-driven repayment plan, federal student loan forbearance and select forgiveness programs. However, for some borrowers, refinancing could make financial sense.
If you are looking to potentially lower your monthly payment, consider using Credible’s student loan refinancing calculator to determine if this would be a beneficial option. Then, you can contact Credible to speak to a student loan expert and get all of your questions answered.
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