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How to get ready to repay your student loan when the payment freeze ends


This week, the Biden administration extended the pandemic pause on student loan repayments until May 1 of next year. The pause had previously been set to expire in a little over a month. It's a welcome relief for more than 41 million Americans with federal student loan debt. They now have three extra months to get ready to start making their payments. We called up a few borrowers to get their reactions, including two in California that we're going to hear from now. Here's Elsa Cavazos, who lives in Los Angeles and is juggling several loans at the same time.

ELSA CAVAZOS: It feels very refreshing, like, oh, thank God, you know, because I already have to do so many payments every month. And, I mean, I was mentally preparing myself to do that in January, you know, like, OK, here we go again (laughter).

NADWORNY: We also spoke to Lauren Quinn, a public school teacher from LA who holds over $58,000 in student debt.

LAUREN QUINN: It's just kicking the can down the road. We're already kind of talking about, oh, how are we going to be able to afford that monthly bill again?

NADWORNY: So how should borrowers prepare? We called Betsy Mayotte for some advice. She's the founder of the Institute of Student Loan Advisors, a nonprofit that offers free counseling to borrowers. And Betsy Betsy Mayotte joins us now. Welcome.

BETSY MAYOTTE: Thanks for having me.

NADWORNY: So many questions from so many borrowers, so we're going to get right to it. You know, a year and nine months is a long time for many borrowers who had a break from paying off these loans. With this extra 90 days, what should borrowers be doing right now ahead of their first repayment?

MAYOTTE: Well, it depends on their financial situation. In addition to not being due for any payments, these loans are enjoying a 0% interest rate. So for borrowers who might be in a comfortable financial position, this might be a great time to pay down as much of that debt as they can at 0% interest. For those borrowers who are struggling financially to prepare, the best thing they can do is make sure they know what kind of loans they have. Get an idea of what their payment will be once the payment pause is lifted and if they're going to need some help figure out which option is going to fit their particular financial circumstances the best.

NADWORNY: The Education Data Initiative says the average federal student loan debt is around $36,000. What if someone can't afford to start paying their monthly bill coming? What should they do?

MAYOTTE: Well, thankfully, with the federal student loan program, there are quite a few lower payment options. Some of them are based on the balance. And some of them are based on the borrower's income. Thankfully, there are a couple of really good tools out there to help borrowers figure out not only what their payment will be under each of those plans, but almost more importantly, how much they'll pay in the long run under each of those plans. So one of those is the loan simulator on the Department of Ed's website, which is studentaid.gov. And then we also have a calculator that does that on our website, which is freestudentloanadvice.org.

NADWORNY: So, basically, you would put in what you know about your situation. It can help you kind of game out the system of monthly and how much you'd pay overall?

MAYOTTE: Correct. And if you're someone that's pursuing a loan forgiveness programs such as Public Service Loan Forgiveness, both of those calculators will also tell you whether you'd stand to get forgiveness in the long run, which is great. And you only have to put the numbers in once, and it spits all this back out at you, so you can compare the different plans with each other right in front of you.

NADWORNY: You know, as we inch closer and closer to repayment, we're starting to see more student loan-related scams on social media and in your email inbox. I wonder, what are tips to recognize those scams, and how do we not fall for that?

MAYOTTE: I'm so glad you brought that up. Student loan scams are one of the big reasons that I founded the Institute of Student Loan Advisors, to try to give people a sort of, quote-unquote, "safe place to go" if they're looking for a third-party advice. If someone reaches out to you and they're asking you for your student loan account PIN or password, that's a huge red flag. No legitimate student loan company is ever going to ask you for that. In fact, under the recently passed STOP Act, it's illegal for them to do that. But that doesn't stop the scammers. If they promise you forgiveness right out of the gate without really knowing anything about your situation, that's another huge red flag.

NADWORNY: So a lot of the borrowers I've been talking to recently are still kind of holding out hope that President Biden will take steps to forgive student loans entirely. From my reporting, that looks unlikely to happen. What do you think about that? Is this an issue that needs a big political solution in your view?

MAYOTTE: This issue has become sort of a mess. First of all, I agree with you. The chances of 100% loan forgiveness are slim to none. Here's the problem. And here's why it's, you know, people that say, well, it'd be so easy for him to do it. Student loans are not the problem. The problem is the cost of higher education. And it doesn't necessarily make a lot of political sense to use U.S. taxpayer money to pay off student loan debt that's just going to accrue again the very next day. Forgiving student loans is like figuring out how to minimize the bleeding, rather than figuring out how to prevent the wounds in the first place.

NADWORNY: I wonder, for borrowers listening right now, kind of like what is next on their to-do list? What are just a few things they've got to do right now?

MAYOTTE: So despite the fact that the pause has been extended, borrowers should be using this opportunity to get their ducks in order, so to speak. The first thing they should do is make sure they know where all their loans are located because one - the other thing that's been going on is servicers have changed. So make sure you know where your loans are. Federal loans, you can just log into studentaid.gov, and it'll tell you who's holding your loans.

The next thing to do is to make sure that those loan holders have your correct communication information, so email, snail mail, phone number. Because when the pause does end, there's going to be some really important information that they're going to be sending to you that you're going to want to see. And then the last thing is figure out what your payment is going to be. Is it affordable? And if not, educate yourself as to what the different payment options are and which one might be best for you, so you're ready to submit that application as we get closer to the end - the real end of this pause.

NADWORNY: That was Betsy Mayotte, founder of the Institute of Student Loan Advisors. Thank you so much for joining us, Betsy.

MAYOTTE: Thanks for having me. I had fun. Transcript provided by NPR, Copyright NPR.

Elissa Nadworny reports on all things college for NPR, following big stories like unprecedented enrollment declines, college affordability, the student debt crisis and workforce training. During the 2020-2021 academic year, she traveled to dozens of campuses to document what it was like to reopen during the coronavirus pandemic. Her work has won several awards including a 2020 Gracie Award for a story about student parents in college, a 2018 James Beard Award for a story about the Chinese-American population in the Mississippi Delta and a 2017 Edward R. Murrow Award for excellence in innovation.
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