When the student loan benefits from the Coronavirus Aid, Relief, and Economic Security (CARES) Act comes to an end on January 31, 2022, federal student loan borrowers may be looking for other ways they can get a break on their student loan debt.
If you’re a covered borrower under the CARES Act and expect to still need relief when the student loan payment suspension period ends, here’s what you need to know, including when the CARES Act ends and how to lower student loan payments.
When does the CARES Act end?
For federal student loan borrowers, the end of the CARES Act benefits will come on January 31, 2022.
Although these benefits were originally set to expire much earlier, President Joe Biden requested an extension through September on his first day in office, and then extended again for a final time. The U.S. Department of Education responded quickly and officially pushed the end date to January 31, 2022.
The student loan provision in the act gives federal student loan borrowers whose loans were originated by the U.S. Department of Education a suspension of payments through that date.
What’s more, interest doesn’t accrue on loans with suspended payments. This means that while your repayment term will be extended by the number of months you didn’t have to make payments, you won’t end up paying more.
That said, while the benefits of the CARES Act will come to end this fall, many Americans are still struggling under the difficult economic conditions brought on by the coronavirus pandemic.
It’s still too early to tell if further student loan relief will be revealed. But in the meantime, it’s important to take steps to determine what you’re going to do when you have to start making payments again on February 1, 2022.
How getting a lower federal loan bill can help
Your federal student loan payments are just one of the many expenses you have in a given month. But if you can manage to reduce them even by a little bit, it can make it easier to afford other necessary expenses.
Getting a lower monthly payment may also make it easier to pay on time every month, which can help you avoid potential damage to your credit score.
Finally, a lower monthly payment can also help keep you out of default, which can cause significant damage to your credit history.
Depending on your situation, take the time to research how you can reduce the monthly payment on your federal student loans.
How to lower student loan payments
If you’re wondering, how am I going to lower my student loan payment at the end of the CARES Act, here are some potential options if you’re a federal student loan borrower.
- Income-driven repayment plans: In addition to a potential new plan, the U.S. Department of Education already offers four income-driven repayment plans. These plans reduce your monthly payments to a small percentage of your discretionary income. They also extend your repayment term to 20 to 25 years, after which your remaining balance will be forgiven — though expect to pay taxes on any forgiven debt.
- Get temporary relief through forbearance or deferment: The federal government offers generous forbearance and deferment programs to borrowers who are experiencing financial hardship. While it’s not a permanent fix, getting on one of these plans can allow you to postpone payments for a little while longer as you work on getting back on your feet.
- Refinance your loans with a private lender: Student loan refinancing involves replacing one or more existing loans with a new one from a private lender. Interest rates are remarkably low right now, so you may be able to qualify for a lower rate than what you’re currently paying, which can reduce your monthly payment. You can also apply for a longer repayment term, which can also lower your payment amount.
Be sure to compare all of your options before you take the next step. Also, be sure to consider both the benefits and drawbacks. For example, an income-driven repayment plan can be a great option now, but it will result in more interest charges over time.
And if you apply for forbearance or deferment, interest will typically still accrue during that time period, making your loans more expensive in the long run.
Finally, with student loan refinancing, it can be tough to get approved with a low interest rate if you don’t have a stellar credit history and strong income and employment history — that can be challenging if you’re unemployed because of the pandemic.
Fortunately, you can apply with a co-signer, but even then, there’s no guarantee you’ll get the terms you want.
Lower my student loan payment by shopping refinance rates
If you’re thinking about refinancing your student loans, it’s important to take the time to shop around and compare rates and other features. Each lender has its own criteria for determining rates, so you go with the first offer you see, you may miss out on a better one somewhere else.
Most student loan refinance lenders allow you to get prequalified through their website before you apply, making it easier to know your odds of approval. With the Purefy Compare Rates tool, though, you can get prequalified and compare rate offers from multiple lenders in one place, saving you some time.
As you compare options, though, look at more than just the numbers. For example, consider whether they’re variable or fixed rates. Fixed rates are a little higher, but they remain the same for the life of the loan, while variable rates can go up (or down) over time.
Also, look at the repayment terms, monthly payment and other features to make sure you pick the right fit for you.
Refinancing may not be the best option for everyone, so make sure you do your due diligence. But if it’s the right fit, it could provide the most savings in the long term compared with the other options.