How To Keep Your Student Loan At $ 0 | FOX 4 Kansas City WDAF-TV

President Biden announced on January 20 that most federal student loan payments would be suspended without interest until September 2021 due to the ongoing pandemic.

Once the suspension is lifted, however, a payment of $ 0 may still be a necessity for some borrowers.

According to an October 2020 survey of Nerdwallet According to the Harris poll, 45% of Americans with their own federal student loans were not convinced they would be able to pay off their loans when the payment freeze was due to end last December.

Hopefully borrowers will be better funded by September. But if you need to keep paying less, here are your options.

Adhere to income-based reimbursement

For a manageable payment, start with a income based repayment plan.

“Look at income-based repayment first, because it offers the most benefits,” says Persis Yu, director of the student loan aid project at the non-profit National Consumer Law Center.

These benefits can include forgiveness after 20 or 25 years of payments, partial interest subsidies, and monthly bills as low as $ 0.

Payments are based on adjusted gross income, family size, and federal poverty guidelines. For example, if you had an AGI of $ 19,000, were single, and lived in the lower 48 states, you would pay $ 0 for 12 months under most income-oriented plans.

If you’re already using one of these plans and your income has gone down, so can your payments.

“It’s important for borrowers to realize that they can apply to have their plans recertified at any time,” says Yu.

You can estimate payments under different income-oriented plans with Loan simulator from the Ministry of Education.

Defer student loan payments

Federal student loan payments can be suspended by postponement and forbearance.

The postponement is linked to events such as the loss of your job or treatment for cancer. If you are eligible, this option can keep payments at $ 0.

For example, a postponement of unemployment may be possible if you work less than 30 hours per week. If your hours have been reduced, but your household income is too high for an income-oriented plan, a deferral may make sense.

The government also covers all interest accrued on subsidized loans during the deferral.

“There are grants on income-based plans, but they’re more generous with deferment,” says Betsy Mayotte, president and founder of the Institute of Student Loan Advisors, a nonprofit that offers free advice to borrowers.

The deferral is often available for up to three years, but you must reapply periodically. For a postponement of unemployment, the duration is every six months.

Place loans in forbearance

Payments are currently suspended without interest due to a special administrative forbearance. At the end of this break, your service agent can grant you discretionary forbearance, potentially without paperwork.

But in addition to the absence of invoices, this type of abstention offers few advantages.

“Tolerance is a last resort,” says Mayotte. “It’s either that, or you will become delinquent or by default.”

Interest usually accumulates during abstention. When it ends, that interest can be added to the amount you owe, meaning that future interest increases on a higher balance.

With any $ 0 payment strategy, you may be able to pay off more globally.

“If you can afford it, I would always recommend paying rather than not paying,” Mayotte says.

Prepare

The most important thing to do now is understand your options, says Scott Buchanan, executive director of the Student Loan Servicing Alliance, a nonprofit organization that represents student loan managers.

Part of this is because the servers cannot change your payments yet.

“It’s a matter of regulation and process,” says Buchanan. “We can’t actually put you on (a) plan right now because you’re not paying back.”

But you can do the following:

  • Verify your information. Log into your server’s website to verify your details and payment amount. If you are unsure who your agent is, visit the Federal Student Aid website. Mayotte says beware of companies reaching out and offering help for a fee; your repairman will never charge you.
  • Gather the paperwork. Applications may require documents like pay stubs, which Buchanan says must be from the past three or four months when you submit your forms. If you are applying now, you will probably have to do it again with more recent information. But you can get a head start by figuring out what you’ll need and filling in what you can.
  • Set a reminder. With payments set to resume in October, plan to submit your claims during the summer.

“If you wait until the day before the due date of the month when 30 million people are going to repay,” Buchanan says, “appeals are going to be long.”

This article was written by Nerdwallet and was originally published by The Associated Press.

More from NerdWallet

Ryan Lane writes for NerdWallet. Email: [email protected]

The article How to Keep Your Student Loan Payment at $ 0 was originally posted on NerdWallet.

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