As the original repayment restart date of September 30th closes in and the pandemic rages on, an extension to the forbearance has been approved until the end of the year. Make sure you know what a federal student loan forbearance extension means for you and your loans.
Forbearance Basics
Normally, forbearance is the temporary suspension of student loan repayments with the accruement of interest.
Forbearances under normal circumstances will increase your overall repayment amount, and they can further stress your budget after they’re over.
However, the forbearance currently in place for federal loans due to the CARES Act will not accrue any interest and will still count as monthly repayments on your loan, even when you’re not paying anything.
This is good for the sake of student loan forgiveness, which relies on months of steady repayments.
However, remember that this governmental forbearance is only for federal student loans and that it will not apply to any private loans you may have.
Check your loan’s website or the Federal Student Aid website to see if your loans qualify.
Effects on Your Wallet
Because of the forbearance, you’re not required to pay off anything on your remaining loan balance. Even if you qualified for a stimulus check in the past or will qualify for potential stimulus checks in the future, you are not required to use it on loans.
Due to the lack of interest accruing, however, you may want to make payments if you can. Your payments don’t have to be the same amount as your regular monthly payments, meaning they can be larger or smaller sums. If you’re doing well financially despite the shutdowns, consider repaying chunks of your loan now to whittle it down.
Government Forbearance and Grace Periods
If you’ve just graduated, your grace period on your loan repayments may end during the forbearance. The grace period itself has not been extended, so you’ll still need to consider your repayment plan carefully.
other valuable tips:
If you want an income-driven repayment plan, make sure to set up your current income just as you would normally. Once the repayments begin during forbearance, they’ll be set to $0 with no interest, just like all the other federal loans. Your grace period will not accrue interest during this time, unlike how it would under normal circumstances.
Plan for 2021
Currently, repayments will carry on as normal once January 1st is here; ensure you have enough money saved to begin making payments on your loans again when the new year arrives. This is a good time to reset financially and to reevaluate your budget.
Continue to stay informed about what a federal student loan forbearance extension means for you and watch for any further news on additional extensions.
Image Credit: federal student loan forbearance by envato.com
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