Student loan payments will resume soon. Here’s what you should know

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1. There is scope for those who struggle

Consumer advocates say many borrowers may have a difficult time adjusting to student loan payments.

“While the risk from the virus has diminished, the financial impact has not diminished,” Persis Yu, deputy executive director of the Student Borrower Protection Center, previously told CNBC.

The Consumer Financial Protection Bureau has also done this warned that about one in five student loan borrowers have risk factors that could cause them to have difficulty paying their bills.

To address these concerns, the Biden administration is introducing a 12-month deadline “on the ramp” for repaymentin which borrowers are protected from the worst consequences of default.

Specifically, borrowers’ late payments should not be reported to credit bureaus for a year and they will not face normal debt collection activities, including wage and pension garnishments, said higher education expert Mark Kantrowitz.

2. Your student loan servicer may have changed

Several of the lenders that service federal student loans for the government – ​​including Navient, the Pennsylvania Higher Education Assistance Agency (also known as FedLoan), and Granite State – stopped during the pandemic break.

As many as 4 out of 10 Student loan borrowers will switch to another company by the fall, according to the CFPB.

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Those served by Granite State will now work at EdFinancial Services, said Kantrowitz, who has been tracking the changes. Great Lakes Higher Education accounts would be managed by Nelnet moving forward, and Navient borrowers would move to Maximus Federal Services/Aidvantage.

Borrowers can check whether they have a new service provider

Meanwhile, borrowers shouldn’t have to do much during the servicer exchange, it said Scott BuchananExecutive director of the Student Loan Servicing Alliance, a trade group for federal student loan servicers.

Some will need to create an updated online account with their new company. “But the communications they received would have told them whether they needed to take that step,” he added.

Even though the risk from the virus has decreased, the financial consequences have not decreased.

Persis Yu

Assistant Executive Director of the Student Borrower Protection Center

If you were signed up for automatic payments with your servicer, which typically results in a small discount on your interest rate, you may need to sign up again, Kantrowitz said.

You should also ensure that your new service provider has your current contact information, as this information may have changed during the Covid pandemic.

3. Your payment amount may vary

If you’re enrolled in the same repayment plan as before the pause went into effect, your monthly bill may not change, Kantrowitz said. The average payment is about $350 per month.

However, if you are logged in an income-driven repayment planYour monthly bill may be different if your income is lower or higher than in March 2020. IDR plans limit your payment to a portion of your discretionary income.

Plus, if you’re enrolled in the Biden administration’s new SAVE plan, your monthly payment should be lower, at least in a timely manner. This plan reduces people’s obligation to just 5% of disposable income, the smallest amount yet. (Some of the program’s benefits will take effect when payments resume, but others will not take effect until next summer due to the timing of regulatory changes.)

To determine how much your monthly bill would be with different plans, use one of the calculators below or Student loan payments will resume soon. Here’s what you should know

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