Student loans borrowers are still struggling right now, even with payments on federal loans suspended.
Nearly half of borrowers in a new survey from personal finance site Student Loan Hero have lost income during the pandemic. About 34% have had their pay or hours cuts and more than one in three borrowers are experiencing food insecurity.
Currently, federal student borrowers have placed in an administrative forbearance, which allows them to temporarily stop making their monthly loan payment. The suspension of payments will last until Sept. 30, 2020, but they can still make payments if they choose.
About two months before the pause on federal student loan payments is scheduled to end, advocates are warning we're not ready.
“Back in March, when the CARES Act was passed, I think September 30 made a lot of sense at that point. We were hopeful that by September we'd have the virus under control, that we'd be getting back to normal, that things would be reopening,” said Sam Gilford, Director of External Affairs at the nonprofit Student Defense. “But of course, here we are in July and it's clear that's not the case.”
Student Defense has been representing students who had their wages garnished months after the CARES Act said that's not allowed.
Just last week, the Department of Education said it's still happening to thousands of borrowers.
The organization stresses that now is the time to be your own best advocate.
“Many people will be eligible for what's called 'income-based repayment,' which is a repayment plan where your payment varies based on your income and if your income drops to certain level, your payment will drop to zero,” said Gilford. “That can be a really good option for a lot of people, but it's something that takes time to get started so don't wait until October 1.”
Gilford says to watch out if you contact the company in charge of your student loans and they recommend forbearance instead of income-based repayment. You get a temporary pause on your payments, but interest keeps growing so your loan is getting bigger.
There's another reason not to wait to contact your servicer.
Student Defense says even in good times, servicers struggle to keep up with the volume of requests and calls from borrowers. So, it's likely they'll be overwhelmed if the pause on payments lifts at the end of September.
The Department of Education is expected to start communicating with borrowers next month about their loan payments getting ready to start again.
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