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These Student Loans Aren’t Part of the 10/1/21 Student Loan Freeze Extension

Ben Luthi

Student loan borrowers who have worried about what’s going to happen after the CARES Act student loans benefit ends at the end of January 2021 now have something to be happy about.

After Joe Biden’s presidential inauguration on January 20, he immediately took action to address further federal student loan payment and interest relief.

On his first day in office, President Joe Biden issued a request to the U.S. Department of Education to further extend the federal student loan pause.

Thanks to this effort, the CARES Act’s student loan protections are now officially set to continue until September 30, 2021.

But while many borrowers can take advantage of the continued student loan freeze, not all are eligible based on the type of loans they have.

Here’s how to find out if you qualify for the September 30, 2021 student loan pause and what your alternatives are if you don’t.

Which student loans are included in the federal student loan pause?

The U.S. Department of Education has implemented extensions to several student loan relief measures, which are currently valid through September 30, 2021.

  • No federal student loan payments.
  • There will also be a student loan interest pause on federal student loans.
  • No garnishments of wages, Social Security benefits or tax refunds to pay student loan debt in default.
  • Non-payments during the student loan pause period count toward Public Service Loan Forgiveness progress.

All of these measures were included in the original CARES Act student loans benefit, so those who haven’t had to make student loan payments under that provision since earlier this year can enjoy the same benefits until September 30, 2021.

But while the CARES Act states that the relief applies to federal student loans, it’s important to note that not all federal loans qualify.

More specifically, only loans owned by the Department of Education are eligible. That includes Direct Loans, but not Perkins Loans, which are owned by colleges, or Federal Family Education Loan Program (FFELP) loans that were issued by private lenders prior to 2010.

As you might guess, private student loans are also ineligible because the federal government doesn’t have any ownership over the debt.

According to The Institute for College Access & Success, 12% of federal student loans (in terms of dollars) do not qualify for the 2020 student loan freeze. A good way to tell if your loan are eligible is to consider whether you’ve been required to make payments over the last several months since the CARES Act went into effect.

If you benefited from that student loan pause, you’ll automatically continue to do so. If not, you still won’t be covered.

What to do if you don’t qualify for the 2021 student loan freeze

If you have loans that aren’t covered under the CARES Act or its extension, you may be wondering how to lower student loan payments or how to skip payments altogether. Depending on your situation, here are some things to consider.

Ask for deferment or forbearance

Both federal and private lenders typically offer some form of deferment or forbearance for borrowers who are experiencing financial hardship. If your need for relief is clear, you may be able to get a pause on your student loan payments for a short period, which can vary from lender to lender.

Keep in mind, though, that this kind of payment pause isn’t the same as what the Department of Education offers its borrowers. Instead, interest will still accrue on your loans while you’re not making payments, and if you’re not making interest-only payments, it will capitalize once the deferment or forbearance period is over.

This means that the interest that accrued during the pause period will be added to your principal balance.

Get on a federal income-driven repayment plan

If you have federal student loans and have the option to get on an income-driven repayment plan, it can be a great way to lower student loan payments.

That’s because income-driven repayment plans calculate your income based on a percentage — between 10% and 20% — of your discretionary income. Depending on how much you’re making, you could reduce your monthly payment significantly.

Note, however, that these payment plans also extend your repayment term to up to 25 years, which means you’ll ultimately spend more on interest than you would if you stuck to your current payment schedule.

Refinance your student loans with a private lender

If you’re wondering how to lower student loan interest and your monthly payments, student loan refinancing may be a solid option.

Whether you have federal student loans, private student loans, or both, it’s possible to refinance them. Refinancing involves replacing your existing loans with a new one from a private lender.

Depending on your credit history and money situation, you may be able to score a lower interest rate than what you’re paying now.

Not only would that save you money on interest charges but it’ll also reduce your monthly payment if you keep the same repayment term.

You can even choose a longer repayment term, which could further reduce your monthly payment. But again, extending your repayment term will result in higher interest charges over the life of the loan.

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Which student loan repayment option is right for you?

If you’re struggling with your student loan payments because you’ve lost your source of income or your hours have been reduced significantly during Covid, refinancing them may not be an option unless you can get a creditworthy cosigner to apply with you.

Otherwise, you may be better off asking for assistance through deferment or forbearance, or by getting on an income-driven repayment plan (federal loans only).

If, however, your income is still relatively stable and your credit history is strong — or, again, if you have a creditworthy cosigner — student loan refinancing may be the best option on the table.

If you’re considering that route, take your time to shop around and compare rates from several lenders.

With the Purefy Compare Rates tool, you can do this with several lenders all in one place quickly and easily.

With these rate quotes in mind, you’ll have a better understanding of what you qualify for and whether it’s the right move for you. In addition to the rates, also consider the repayment terms, monthly payments, and other features that could be valuable to you as you work to pay off your student loan debt.

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Education Loan Finance is a nationwide student loan debt consolidation and refinance program offered by Tennessee based SouthEast Bank. ELFI is designed to assist borrowers through consolidating and refinancing loans into one single loan that effectively lowers your cost of education debt and/or makes repayment very simple. Subject to credit approval. See Terms & Conditions. Interest rates current as of 11-21-2022. The interest rate and monthly payment for a variable rate loan may increase after closing, but will never exceed 9.95% APR. Interest rates may be different from the rates shown above and will be based on the term of your loan, your financial history, and other factors, including your cosigner’s (if any) financial history. For example, a 10-year loan with a fixed rate of 6% would have 120 payments of $11.00 per $1,000 borrowed. Rates are subject to change.

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Fixed rates range from 3.99% APR to 8.24% APR with a 0.25% autopay discount. Variable rates from 2.24% APR to 7.99% APR with a 0.25% autopay discount. Unless required to be lower to comply with applicable law, Variable Interest rates on 5-, 7-, and 10-year terms are capped at 8.95% APR; 15- and 20-year terms are capped at 9.95% APR. Your actual rate will be within the range of rates listed above and will depend on the term you select, evaluation of your creditworthiness, income, presence of a co-signer and a variety of other factors. Lowest rates reserved for the most creditworthy borrowers. For the SoFi variable-rate product, the variable interest rate for a given month is derived by adding a margin to the 30-day average SOFR index, published two business days preceding such calendar month, rounded up to the nearest one hundredth of one percent (0.01% or 0.0001). APRs for variable-rate loans may increase after origination if the SOFR index increases. The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. This benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. The benefit lowers your interest rate but does not change the amount of your monthly payment. This benefit is suspended during periods of deferment and forbearance. Autopay is not required to receive a loan from SoFi.

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