Some of America's most valued workers like teachers, police officers and medical professionals are struggling to repay their student loans, according to a November 2021 report from the Teachers Insurance and Annuity Association (TIAA).
TIAA surveyed nonprofit and public sector employees with student loan debt and found that 57% of them are $50,000 or more in debt, with about a quarter (24%) being over $100,000 in debt.
The urgency of this issue is being brought into the spotlight as the payment pause on federal student loans comes to an end in January 2022. The vast majority (95%) of survey respondents will experience at least some difficulty keeping up with student loan payments once the COVID-19 administrative forbearance period expires. Two in five (40%) said they will have "a great deal" of difficulty with federal student loan repayment in February.
Nearly half (45%) of student loan borrowers in these sectors say it would have been "very difficult" or "impossible" to pay their student loans without the relief from the CARES Act over the past 18 months. Before the pandemic, 22% of respondents were in deferment or forbearance, and nearly one in ten (8%) were delinquent or in default.
Student loan delinquency can result in fees, added interest and negative credit impacts. If you're not ready to resume student loan payments in a few months, consider your repayment and refinancing options to avoid going into default.
Visit Credible to compare student loan refinance rates across multiple private lenders without impacting your credit score.
3 ways to avoid delinquency when student loan payments resume
The Biden administration issued a "final extension" of the COVID-19 emergency relief period, which means federal student loan payments will restart in February 2022. Here are a few things you can do with your private and federal student loan debt when the payment pause ends in just a few months:
- Enroll in an income-driven repayment plan (IDR). Federal student loan borrowers may be able to limit their monthly payments to 10-20% of their disposable income by enrolling in an IDR plan on the office of Federal Student Aid (FSA) website.
- Apply for up to 36 months of additional forbearance. In addition to the COVID-19 administrative forbearance, you can apply for federal forbearance by filling out an economic hardship or unemployment deferment request.
- Reduce your monthly student loan payments by refinancing. Locking in a lower interest rate on your student loans may help you save hundreds on your monthly payment amount. Borrowers who refinanced to a longer loan term on Credible lowered their monthly payments by more than $250 on average.
Interest rates for student loan refinancing are near historic lows, according to data from Credible. You can browse student loan rates from real private lenders in the table below and visit Credible to see your estimated rate for free.
Should you refinance your student loan debt?
Student loan refinancing can help you lock in better repayment terms, such as a reduced interest rate, cheaper monthly payments and even faster debt payoff.
Refinancing your federal student loans into a private loan does come with its downsides. You'll lose eligibility for federal protections like IDR plans, zero-interest forbearance and even student loan forgiveness programs like Public Service Loan Forgiveness (PSLF). However, if you don't plan on utilizing these benefits, then it may be worthwhile to refinance to a lower rate.
Plus, you don't risk losing access to these benefits by refinancing your private student loan debt, since these loans weren't eligible for federal protections in the first place.
To determine if student loan refinancing is right for you, see your estimated interest rate by getting prequalified on Credible. Then, use a student loan refinance calculator to see if you can benefit from this repayment option.
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