Introduction
You probably have some questions about the current student loan suspension, which has left millions of borrowers wondering how they’ll pay for their loans over the next few months. Are Student Loans Still on Hold in 2022, read on to find out how your loans may be affected?
Borrowers will not owe interest on their federal student loans.
During forbearance, interest will not accrue on your federal student loans. Interest will still accrue on private loans.
Some federal student loans do incur interest during forbearance periods, such as the following:
- Perkins Loans are low-interest loans that are repaid by your school upon graduation or when you leave school. If you’re in a period of deferment or forbearance while obtaining a degree at least half-time, no interest is charged as long as you continue to make payments on time each month. However, if your Perkins Loan becomes delinquent due to nonpayment or delinquency for other reasons (such as being placed into an alternative repayment plan), interest may begin to accrue from the date of delinquency forward (regardless of whether or not payments are made).
- Federal Direct Consolidation Loans with grace periods have been extended until July 1st so borrowers who have missed payments since October 15th, 2018 can get back on track!
Borrowers can still make payments on their loans if they have the right kind of loans, if they want to pay any interest or if they want to pay down the principal balance of their loan.
- Forbearance is a way to temporarily stop making payments on your student loans, but you still have to pay the interest that accrues on them. For example, if you have a $10,000 loan at an 8% fixed interest rate and put it in forbearance for one year (12 months), then at the end of that year, the unpaid balance would be $10,216 (instead of $10,200). The difference between these two numbers ($216) is the interest that accrued during this period. You’re responsible for paying all of this additional money when you start making payments again after forbearance ends—plus any new interest that has accumulated since then!
- If you decide not to make payments during forbearance and want to reduce your principal balance instead:
- pay more than your monthly minimum payment by contacting your servicer; or -make lump sum payments after each semester/term ends; or -use Direct Debit from your checking account so they automatically withdraw funds from savings or checking each month
It may be easier to qualify for an income-driven repayment plan while your student loans are suspended.
- You may be able to qualify for an income-driven repayment plan while your student loans are suspended.
- You may not be able to qualify for an income-driven repayment plan while your student loans are suspended.
- How do I determine if I qualify for an income-driven repayment plan?
The U.S Department of Education provides several tools and resources to help you determine if you qualify for an income-driven repayment plan: https://studentaid.ed.gov/sa/repay-loans/understand/plans
Not all types of student loan forgiveness programs are paused by this suspension period.
Not all student loan forgiveness programs are affected by this suspension. The following kinds of forgiveness programs are not paused:
- Public Service Loan Forgiveness (PSLF)
- Income-Driven Repayment Plans (IDRPs)
- Teacher Loan Forgiveness Program
But, not every type of loan can be forgiven. If you’re having trouble paying off your loans, check out our guide on how to get free from them!
Private student loans may not be on hold at all, depending on your lender.
Private student loans are not eligible for forbearance and do not go through the same process as federal student loans. If you have private student loans and are experiencing financial hardship, contact your lender to see if they will consider deferring payments while on leave.
Interest will not accrue during this period.
During this time, interest will not accrue on your federal student loans. This means that you won’t have to pay any extra money for the privilege of having your loans on hold.
However, if you have private student loans or other debts that aren’t related to school (for example, credit card debt), then interest will continue to accrue during this period.
You’ll still be able to choose an income-driven repayment plan after the forbearance period ends.
Now that you know that your loans are on hold, it’s important to know that you will still be able to choose an income-driven repayment plan after the forbearance period ends. If you have the right kind of loans and want to make payments on them or pay any interest that has accrued since your last payment, then this is a good option for you.
If your income-driven repayment plan allows for principal reduction and if this is something you want to do—and only if—then now is the time for action! You’ll need to contact your loan servicer before any payments are due in order for them not only to understand how much money they’re going to ask from Federal Student Aid but also how much monthly payment should be applied toward principal and interest (as opposed to just interest).
It’s important to apply for income-driven repayment plans or other repayment options before the forbearance period ends.
As you can see, there are many options available to you if you find yourself in financial hardship. While it’s true that not all of them are ideal, they may be able to help you with your student loans. If you’re struggling to make payments on your federal student loans right now, contact our office to discuss the different options we can offer.
Conclusion
We hope this article has been helpful in explaining what student loans are still on hold and how to go about getting them back on track. For more information, please see our full Student Loan Forgiveness Guide here.