For 42.9 million student loan borrowers , it's been 18 months without a payment. That ends in October — ready or not.
The interest-free federal student loan payment pause, known as a forbearance, was extended three times after it initially went into effect in March 2020 as a way to help reduce the financial blow many borrowers experienced as a result of the pandemic.
But with payments set to resume in a few months, servicers — the companies that manage student loan payments — are already fielding thousands of calls a day from borrowers seeking student loan help, according to Scott Buchanan, executive director of the Student Loan Servicing Alliance, a nonprofit trade organization for student loan servicers.
Time is running out for both servicers and loan borrowers to prepare for repayment.
While Education Secretary Miguel Cardona has indicated it's not "out of the question" to extend the loan forbearance beyond Sept. 30, for now borrowers should be prepared for bills to come due sometime in October (they're supposed to be notified at least 21 days prior to their exact billing date).
TALK WITH YOUR SERVICER NOW
Servicers are expecting borrower demand for help to increase and may have trouble keeping up. The repayment system has never been turned off before, so no one is sure what restarting it simultaneously for 42.9 million people will look like.
"We don't have any guidance from the department (of Education) about what a resumption strategy would look like," says Buchanan. "We are in the time frame where those plans need to be communicated; it cannot wait."
Richard Cordray, the newly appointed head of the Education Department's federal student aid office, told The Washington Post for a story on June 11 that restarting payments was "a very complex situation" and said the office planned to provide more information to servicers soon. He also said the department planned to hold the servicers accountable by setting rigorous performance benchmarks.
Despite the uncertainty, if you're worried about your ability to make payments, there's no downside to contacting your servicer now to beat the rush, says Buchanan. Ask about your best options to manage payments, depending on your situation.
If you're not sure who your servicer is, log in to your My Federal Student Aid account to find out. To ensure you don't miss any notifications, check that your contact information is up to date on your loan servicer's website and in your StudentAid.gov profile.
KNOW YOUR REPAYMENT OPTIONS
"Your options are not 'pay or default,'" says Megan Coval, vice president of policy and federal relations at the National Association of Student Financial Aid Administrators. "There are options in between for lowering payments. Nobody, including the federal government, wants to see you go into default."
Default happens after roughly nine months of late federal loan payments. It can result in a damaged credit score, wage garnishment, withheld tax refunds and other financial burdens.
— If payments will be a hardship: Enrolling in an income-driven repayment plan sets payments at a portion of your income, which could be $0 if you're out of work or underemployed. Or you could opt to pause payments (with interest collecting) using an unemployment deferment or forbearance.
— If you were delinquent before the pause: Your loans will be reset into "good standing." Making monthly payments on time will help you retain that status. But if you think you might miss a payment or you don't think you can afford payments altogether, contact your servicer about enrolling in an income-driven plan.
— If you were in default before the pause: Contact your loan holder or the education department's default resolution group to find out how to enter into loan rehabilitation and get back into good standing.
FIND A LEGIT RESOURCE
Servicers may be your first point of contact, but they don't have to be your last. You may have other needs your servicer isn't providing, such as financial difficulty beyond your student loans or legal advice.
Cash-strapped borrowers can find legitimate student loan help for free with organizations such as The Institute of Student Loan Advisors . Other student loan help, such as a credit counselor or a lawyer, will charge fees. You can find reputable credit counselors through organizations such as the National Foundation for Credit Counseling .
Financial planners can also help, but it's best to look for one with student loan expertise, such as a certified student loan professional.
You can find legal assistance, including advice on debt settlement and pursuing bankruptcy, with lawyers who specialize in student loans or with legal services in your state as listed by the National Consumer Law Center.
If your issue is with your servicer, contact the Federal Student Loan Ombudsman Group , which resolves federal student aid disputes. You can also file a complaint with the Federal Student Aid Feedback Cente r or the Consumer Financial Protection Bureau.
Legitimate student loan help organizations won't seek you out with offers of debt resolution through unsolicited texts, emails or phone calls. Most importantly, you don't have to pay anyone to apply to consolidate your debt, enter into an income-driven repayment plan or apply for Public Service Loan Forgiveness.
"The hard and fast rule is that applying for (consolidation and repayment) programs is free," says Kyra Taylor, staff attorney focusing on student loans at the National Consumer Law Center. "I think when people realize what they can do for free, it makes it easier for them to spot scams."
And don't fall for any company that promises to forgive your student loans or wait for the government to do so — thus far, no executive action from President Joe Biden or legislation from Congress has come to pass.
This article was provided to The Associated Press by the personal finance website NerdWallet. Anna Helhoski is a writer at NerdWallet.
NerdWallet: How to get student loan help https://bit.ly/3q1J2mF
My Federal Student Aid https://studentaid.gov/fsa-id/sign-in/landing
National Consumer Law Center: Student Borrower Assistance Project legal resources https://www.studentloanborrowerassistance.org/resources/referral-resource/legal-resources/