11 2022 Tips for When Pandemic Student Loan Forbearance Ends

11 Important Facts About Pandemic Forbearance

By: Reyna Gobel

While you’ve receiving notices from your student loan servicer for weeks about making payments at the end of the pandemic forbearance, you’ve likely also found out President Biden extended the forbearance until May 1st.

What does this mean to you? And will  the payment restart date just keep getting extended?

Here are 11 facts and tips you need to know:

FFEL Loans can still default without payments.

The most common types of federal student loans are Federal Family Education Loans (FFEL) and Direct Loans. Over the last 11 years, federal student loans have been issued directly by the government. These are direct loans. Loans that the banks issued that were backed by the federal government are FFEL loans. These older loans don’t automatically get the forbearance. You have to call and ask for the pandemic forbearance

If you don’t make FFEL loan payments without this request, you could get dings on your credit report or a loan default. It takes 9 missed payments to default, which comes with penalties such as a financial penalty equal to 20 percent of your loan balance, credit dings, or getting denied for other loans or government job. If a loan default has already happened, contact the guaranty agency immediately. You can find their contact info and the status of your loan by logging in studentloans.gov. 

Apply for Income-Driven Repayment Plans Immediately if Needed.

Income-driven repayment plan applications can take weeks to process. Apply ASAP so there is time to report income and for processes. Don’t forget to ask about other repayment options if the income-driven repayment plan is too high. You can also switch among income-driven repayment plans if you need to stay on one due to Public Service Loan Forgiveness. If you were previously on an income-driven repayment plan, you won’t have to recertify your income until at least August. 

Consider Public Service Loan Forgiveness and Other Loan Forgiveness Options.

Having zero percent interest isn’t the only way to keep your student loan debt from growing. Public Service Loan Forgiveness is a federal student loan program forgiving the remaining balance after 10 years of on-time repayment after 10 years of on-time payments with an income-driven repayment plan while working for a public service employer.  There also other forgiveness programs for teachers, military, and on an employer-by-employer basis. Check federal and state department of education websites for student loan forgiveness options in addition to your human resources office.

You Could Have an Additional Grace Period Based on Your Graduation Date.

The pandemic forbearance is it’s own unique forbearance that doesn’t affect time limits on other forbearances, deferments, or grace periods. You could qualify for a grace period, a time period without payments aren’t required, for 6 months from your graduation date or last day you were enrolled in at least half-time higher education. However, the two can coincide. For instance, if you graduated in December, your grace period would still end in May. Other types of payment breaks are separate and couldn’t exist at the same time as the pandemic forbearance. 

Payments Become Due May 1 on All Federal Student Loan Types.

No matter whether you have subsidized, unsubsidized, graduate PLUS, or parent PLUS loans, payments restart or continue on May 1st. The only exception is if you qualify for a different kind of break from payments or a $0 payment with an income-driven repayment plan.

The 0 percent interest rate will end for loans with the exception of federal subsidized loans that are in deferment for reasons such as in school status. Subsidized student loans are issued to undergraduate students based on financial need. 

The Payment Break Didn’t Apply for Private Student Loans

Each private student loan lender sets its own rules. That doesn’t mean you can’t get a break from payments. Private lenders offer breaks for a variety of reasons including unemployment. They also may offer bonus perks such as career services for finding your next job. Contact your servicer for options see when you hit a financial snag.

Direct Loans Have Special Privileges.

Even when you do request the pandemic forbearance with an FFEL loan, it’s still smart in most circumstances to consolidate your loans to Direct Loans. Why? Most new programs, including potential partial forgiveness up to a specific amount could or do require consolidating to Direct Loans. Consolidation is when you request federal student loans to be combined into one loan. it can also be one FFEL loan being consolidating in order to get Direct Loan perks.

Consolidation is an easy process that doesn’t change your loan by much in the way of interest rate or principle. However, you don’t want to consolidate your loans if you are close to paying off your loans through an income-driven repayment plan. The time clock to forgiveness will start over, as it’s considered a brand new loan.

Public Service Loan Forgiveness (PSLF) Clock Didn’t Stop.

If you are one of the lucky people who could qualify for Public Service Loan Forgiveness, the time clock for paying off your loans was ticking during the forbearance, as long as you kept your public service employment. If you temporarily furloughed from your job, you might lose those months. Let’s say you had 6 months between public service employment positions. You’d add six more months to the 10 years of on-time payments required. If you technically (were employed still but didn’t go to work) kept your job, every month of pandemic forbearance counted.

You Can Make Payments Whenever You Want.

One of the exciting parts of this forbearances is no interest is charged on federal loans. This rarely happens with federal student loans beyond the subsidized ones.  So as long as you don’t qualify for some kind of loan forgiveness, it’s a great time to send in payments. Sending in your normal payment would chip away at your loan because the payment goes straight to the principle.

You Could Have Additional Temporary Payment Break Options.

If you’re worried about payments resuming because your income hasn’t rebounded from the pandemic yet or you have a medical emergency, don’t worry. There are still options for breaks from payments. Call your loan servicer and ask about deferment and forbearance options. The difference between the two is interest in still charged in forbearance, with the exception of the pandemic forbearance. Deferments may also be awarded based on specific circumstances and interest is waived during the approved time limit on your subsidized loans. All of us who went to school at least half time experienced a deferment while in college. After college, military and an economic difficulty are the mains reasons for one.

While payment breaks exist, don’t forget to include changing payment plans in your discussion. If you can get a $0 income-driven payment that gets to closer towards the time clock for the remaining balance being forgiven, it’s a much decision

Income-Driven Repayment (IDR) Forgiveness Countdowns Continued

Even though you didn’t make payments based on your income during the forbearance, every month still counted. So if your IDR plan forgives the remaining balance after 20 years of repayment, you scored about 2 years of time towards it if you were in forbearance. If you have an FFEL and didn’t ask for the pandemic forbearance, you can still ask for it for these remaining two months.

Bottom Line

The pandemic forbearance is ending. Figure out the payment you can afford and go over the options with your loan servicer. After all if your payment is unaffordable, it may be the payment plan you chose.  Always include income-driven options and forbearance and deferment options in your discussion. If you’re hoping for partial forgiveness after 10 years of on-time payments with a public service employer or after a longer period of time with an income-driven repayment plan, every month counted. For PSLF the exception is if months you didn’t work for a public service employer.