The student loan debt forbearance during the Coronavirus pandemic has been instrumental in preventing delinquencies and defaults. Once the freeze ends, that protection goes away, and borrowers will enter repayment during a time with record inflation and an economy that’s been in a recession for several months.
The New York Federal Reserve reported earlier this year that two groups of borrowers would likely struggle more than others when the student loan payment pause ends:
People not enrolled in an income-driven repayment plan
Non-white, female, and middle-aged borrowers with lower-income and less education.
If you know you’ll struggle to add another bill to your budget, contact your student loan servicer about switching to an income-driven repayment plan. Each IDR plan caps your monthly payments at a portion of your income and forgives your remaining loan balance after your last payment.
Related: Income-Driven Repayment Plan Forgiveness
Borrowers with loans made through the Direct Loan Program, including Parent PLUS Loans, have access to better repayment and debt relief options. If you went to school before 2016, there’s a chance you may have older loans made through the Federal Family Education Loan Program and the Perkins Loan Program. Those loans must be consolidated into a Direct Loan before receiving those added benefits. Read more about FFEL loan forgiveness.
Are you struggling with private student loans? There aren’t many options to permanently lower your monthly payments. Your servicer may be willing to grant a temporary forbearance or deferment, but when that time runs out, your payments will increase, and you’ll be stuck with a bill you can’t afford. Student loan refinancing can help, depending on your credit score and income. But interest rates have increased over the past several months, which can make your refinance options less attractive.
Learn More: How to Refinance Student Loans