This extension is the sixth since the COVID-19 pandemic began. It comes just weeks before payments are scheduled to resume on May 1. It will have a significant impact on millions of borrowers who haven’t been required to pay.
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Robert Farrington, founder of The College Investor, says, “We saw the extension coming. I think it also leaves room for another extension.” “The announcement today clearly showed that Biden is using his powers as required by the HEROESAct, which requires that there be a national emergency. He can extend the national emergency as long as it exists.
The announcement contains a plan that will eliminate default and delinquent status for all borrowers. This will give them a “fresh beginning” when they enter repayment. Farrington says it is a major win for borrowers who were having trouble paying their taxes before the pandemic, or had their tax refunds garnished.
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He says, “With this change it will help many borrowers get back onto track when payments begin.”
According to a White House statement, the Biden administration stated that it is extending the pause because Americans are still recovering from the pandemic and unprecedented economic disruptions it caused.
What does this Extension mean for Borrowers?
Although this extension is significant for student loan borrowers it doesn’t mean that you should change your approach to student loan debt.
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Keep going. You can still take advantage of the pause to make financial decisions. Experts recommend that you use these extra months to divert money towards building an emergency fund, or paying down higher-interest debt like student loans or credit cards.
Farrington suggests that you set aside money in a savings account to pay off student loans.
However, it is a good idea to plan for when your payments will resume. You can also make sure that your personal information, such as your email address, phone number and address, is up-to-date so you are always aware of any changes to your loans.
Also, you should know your debts. Double-check the grace periods and pay-off dates for your loans. Finally, review your repayment plan to make sure it is in line with your financial situation. For when payments are resumed, you should start to create a budget for the future. Consider any income changes and determine if you have to reduce spending in order to make room for student loan payments.
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Federal student loan payments will resume as of right now at the end August. Experts say that you should not base your strategy on the perception of more student loan relief. It is worth keeping an eye on over the coming months.