Survey: 93% of student borrowers not ready to start payments again in May

Student loan repayments resume in May, but a new survey suggests the vast majority of borrowers are not financially prepared. (iStock)

Federal student loan repayments resume May 1 after more than two years of COVID-19 emergency forbearance. However, 93% of student borrowers are not ready to resume their payments, according to a survey conducted in February by the Student Debt Crisis Center (SDCC).

More than a quarter (27%) of the 23,532 student borrowers surveyed said they would never be financially ready to make payments again. Additionally, 85% said they currently rely on payment break financial relief.

If you’re one of the vast majority of student borrowers who aren’t ready to start payments again in two months, keep reading to learn how to prepare yourself financially. One strategy is to refinance your student loans at a lower interest rate. You can visit Credible to compare student loan refinance rates for free without affecting your credit score.

POLL: MOST AMERICANS WANT STUDENT LOAN PAYMENT BREAK EXTENDED UNTIL 2023

Student borrowers say inflation will make it harder to resume payments

With inflation and consumer debt at record highs, the vast majority (92%) of full-time student borrowers fear rising prices will make it harder to meet their monthly payments in May, SDCC reports.

“Our results show that the ongoing pandemic combined with unprecedented inflation are huge hurdles for borrowers who are, overall, not ready to resume payments, are struggling to meet their basic needs and are confused about their options moving forward,” SDCC President Natalia Abrams said. .

Inflation has increased by 9% since the start of the coronavirus pandemic in March 2020, according to the consumer price index (CPI). So while your student loan repayments may be the same as before the forbearance period, rising prices for other goods and services may make it more difficult to meet your monthly payments.

One way to reduce your student loan repayments is to consolidate into a private loan at a lower interest rate. Keep in mind that refinancing your federal loans will make you ineligible for government benefits, such as income-contingent repayment (IDR) plans and some student loan forgiveness programs. You can read more about student loan refinancing on Credible to decide if this strategy is right for you.

THESE 2.4M BORROWERS MAY NOT GET A STUDENT LOAN FORGIVENESS

How Borrowers Can Prepare to Resume Student Loan Payments

A third of borrowers surveyed by SDCC said they had cut back on basic necessities like food, rent and healthcare in preparation for the end of forbearance in May. However, there are several other ways to prepare for student loan repayment:

Learn about each strategy in the sections below.

Get in touch with your loan manager

During the student loan payment pause period, millions of borrowers saw their loan balance transferred to a new servicer. Worryingly, more than half of borrowers surveyed say their student loan officer has not contacted them with details about when their payments will resume.

Contact your loan manager to get a clear idea of ​​your payment due date, monthly payment amount, remaining loan balance and current interest rate. Your loan repayment terms must be the same as before the start of the forbearance period. However, you may need to re-enroll in Autopay to avoid missing a payment in May.

If you’re unhappy with your current repayment terms, such as your interest rate or monthly payments, you may want to consider refinancing. You can view your student loan refinance offers on Credible for free with a soft credit application.

3 STUDENT LOAN CHANGES IN 2022 BORROWERS SHOULD KNOW

Sign up for income-oriented repayment

Federal student loan borrowers may be eligible to enroll in an IDR plan to limit their monthly payments to between 10% and 20% of their disposable income. The Department of Education offers four IDR plans, depending on the type of student loan you have:

  1. Revised Pay As You Earn Repayment Plan (REPAYE Plan)
  2. Pay As You Earn Reimbursement Plan (PAYE Plan)
  3. Income Based Reimbursement Plan (IBR Plan)
  4. Income Contingent Repayment Plan (ICR Plan)

How much you pay each month depends on the type of plan you choose, as well as your household income and family size. Check if you are eligible for income-based reimbursement by logging into your account on the Federal Student Aid (FSA) website.

Request an additional federal deferment

If IDR plans aren’t enough to keep you out of delinquency, you might consider deferring your federal student loans. It is important to note that interest may accrue on your loans while you are in deferment, which will increase the overall cost of borrowing.

You may be eligible to defer your federal student loans if you are unemployed or meet economic hardship standards. It is also possible to defer your student loan repayments while you are still in school.

LEGISLATIVES INCREASE PRESSURE ON PRESIDENT JOE BIDEN TO CANCEL STUDENT LOANS

Apply for student loan forgiveness

As a presidential candidate, Joe Biden campaigned to forgive $10,000 in student loan debt per borrower. And while the president has yet to enact widespread student loan relief, his administration has provided billions of dollars in student loan relief through the following programs:

  • Public Service Loan Cancellation Program (PSLF): The Biden administration announced significant changes to the PSLF program in October 2021 that made it easier for candidates to meet eligibility requirements. As a result, approximately 70,000 public servants received $5 billion worth of student loan forgiveness under this program.
  • Closed School Release Program or Borrower Defense: If your college was at fault during your enrollment or became default, you may be eligible to have your federal student loan debt forgiven. The Department of Education has canceled about $3.2 billion in debt through these programs since President Biden took office.
  • Total and Permanent Disability (TPD) Leave Program: Borrowers with disabilities may be able to have their federal student loan forgiven. Under the Biden administration, more than 400,000 borrowers qualified for TPD discharges for a total of $7 billion in student loan relief.

These federal student loan forgiveness programs have strict eligibility criteria, which means that many borrowers will not qualify. Also, these programs only apply to federal student loans, not private student loans.

Reduce your monthly payments with refinancing

It may be possible to lower your monthly payments, pay off debt faster, and save money over time by refinancing your student loans at a lower interest rate. According to data from Credible, student loan refinance rates are currently near all-time lows, meaning some borrowers may be able to save more money than ever before.

Average student loan refinance rate by credit score

The interest rate you qualify for depends on the amount and term of the loan, as well as your credit score. Well-qualified applicants with good credit scores will qualify for the best possible student loan refinance deals. On the other hand, borrowers with bad credit may need to refinance their student loans with a cosigner to meet eligibility criteria.

That being said, student loan refinancing is not for everyone. If you plan to take advantage of federal student loan benefits, such as student loan forgiveness programs, refinancing would make you ineligible. But if you don’t plan to use federal protections or already have private student loan debt, refinancing may be a good option.

You can compare student loan interest rates from private lenders in the table below. Then you can use Credible’s student loan refinance calculator to decide if this strategy is right for your financial situation.

EXTENDING THE STUDENT LOAN ABSORPTION: WHAT BORROWERS SHOULD KNOW

Do you have a financial question, but you don’t know who to contact? Email the Credible Money Expert at [email protected] and your question might be answered by Credible in our Money Expert column.

Comments are closed.