DES MOINES, Iowa — The Biden-Harris administration recently announced the student loan pause through May 1. As many Americans were getting ready to start those payments on February 1, they now have more time.
Since this was announced about two weeks ago, it has taken many Americans and Iowans by surprise. Now, these next three months give borrowers more time to plan on how they will get those loans paid, or ask for assistance.
“So the most important thing for borrowers to do right now is that May 1 they are going to have to make a payment. So if they know right now that they’re going to struggle, and where they’re likely to struggle, they should be calling their loan servicer. They should make sure they know who their servicer is, they should get the contact information and they should reach out proactively to their service or their services as they have things that they can do to help them. They have different payment plans where they can lower your payment amount,” said ISL Education lending CEO, Steve McCullough.
Although you may select or be assigned a repayment plan when you first begin repaying your student loan, you can change repayment plans at any time, here are some of the plan options.
- Use a loan simulator: You can use loan simulator to get an early look at which plans you may be eligible for and see estimates for how much you would pay monthly and overall.
- Pay as you earn: Monthly payments under this plan would be equal to about 10% of your income.
- Income-based payment: This is similar to paying as you earn but payments are equal to 15% of your income.
- Graduated repayment plan: Payments are lower and then increase, usually every two years.
- Extended repayment plan: Payments may be fixed or graduated, and will ensure your loans will be paid off in 25 years.
“There are 90 days to prepare for that. You should be preparing and you should be making arrangements and not just calling to ask for a lower payment amount, but make sure you’re going to have the money to do it. If you’ve taken that money and you’ve spent it on other things, or you’re used to spending on other things. Now’s the time to tighten your belt again and start to budget,” said McCullough.