SOUTHFIELD, Mich. (WXYZ) — At the end of this month, millions of student loan borrowers saddled in debt will be expected to begin repaying their loans.
It comes as an interest-free payment pause, put in place by the CARES ACT, is set to expire.
Lawmakers failed to negotiate an extension for the pause in the recent COVID relief bill.
February will be a tough month for those expected to repay.
As you know, the economy is still not in good shape. Many are still out of work. For those who are working, it's a struggle to keep their emergency savings afloat.
When Alyssa Gray isn’t virtually teaching, she’s calculating ways to pay off her loans.
“I’ve paid two of my four underground private loans off, I have two more left and then I have my graduate loans,” said Gray.
To date, she owes $75,000 in federal loans and another $24,000 in a private loan.
"Total, I am almost at $100,000,” said Gray.
When the CARES ACT went into place, there was a bit of relief. Student loan payments were suspended with interest rates set to zero.
Though Alyssa was still teaching, she took advantage of the assistance.
“I didn't know how long it was going to last and it was just not something I wanted to worry about,” said Gray.
Instead, she used those savings for a rainy-day fund but that fund is soon to be empty once again.
Millions of college borrowers are expected to resume paying early next month after lawmakers failed to negotiate an extension of loan forbearance relief.
Alyssa is not alone in her concern about the future. 7 out of 10 respondents in a Twitter survey tell me they find the idea of repaying difficult.
“Now that it could happen again in February, I think everyone is bracing for impact."
So why did Congress drop student loans from the stimulus package?
Financial aid expert Mark Kantrowitz says it's likely because an extension came with a high price tag. Though he says an extension into the fall is necessary.
"It cost a little bit under 5 billion dollars per month,” said Mark Kantrowitz from privatestudentloans.guru.
“I think September 30th is about right assuming the vaccine,” added Kantrowitz. “People do get the vaccine and we start seeing an improving economy.”
There is still a chance. An extension, or even loan forgiveness, could be granted under a new Biden administration, but the path forward is still unclear.
Is there anything in this bill that students can hang onto?
HERE’S THE REBOUND RUNDOWN ON CHANGES INCLUDED UNDER THE NEW RELIEF LAW
- A 5-year extension of a tax incentive to employers to help pay down your student loans.
- Financial aid eligibility has expanded with an additional 1/2 million more students expected to qualify for a Pell Grant, and 1.7 million more expected to receive the maximum Pell award.
- That student loan forbearance period is currently set to end on Jan 31st. But there are some options for students who can’t pay.
You can apply for unemployment or economic hardship deferment. you can also get on an income-based repayment plan. All of those helping you buy some time should you need it.