Once again, the federal student loan payment and interest freeze has been extended.

President Biden’s latest relief is a bit different than the previous extensions.

As a result, the suggested action for borrowers is slightly different this time around. However, there are still a couple of great opportunities to eliminate debt and protect yourself going forward.

The Strategy for the Next Six Months

Borrowers looking to get the most out of the student loan relief should consider the following:

sk for a Refund on Previous Payments

Federal student loan payments made during the 0% interest and payment freeze can be refunded.

I recently heard from one borrower who ran into a medical issue and received a refund of thousands of dollars.

The refund process is simple, and it is an excellent opportunity for borrowers to build up their emergency funds. Those that wish to attack their student debt can always make a large payment at the end of January.

The benefit of getting the refund is flexibility and whatever interest your savings account earns.

Hold off on Extra Payments

Many borrowers are making extra payments in an attempt to maximize the 0% interest.

I think the ideal approach is to hold on to this cash until January. There isn’t any benefit to paying now versus paying later. At the very least, you can put that money in a high yield savings account earn some interest.

The one exception would be borrowers who might be tempted to use the cash for something unnecessary. If you see the money sitting in a savings account and it is burning a hole in your pocket, sending it to your lender to avoid temptation is a reasonable choice.

Get Ready Before February 2022

The repayment restart will be ugly. Loan servicers expect to receive more calls in a month than they typically receive in a year.

Borrowers that get questions answered ahead of time will avoid headaches.

Before payments resume, it is a good idea to know your repayment plan, how much you will be paying per month, and how you will make payments. If you are working towards forgiveness, take steps to track your progressbefore servicers get slammed.

Why Biden Needed to Extend the Student Loan Relief

Previous extensions were easy to predict. Between the pandemic and the politics, the most likely outcome was apparent.

This time around, things were less obvious. With the economy seemingly doing well and a vaccine available, an extension seems less necessary. However, there were several student loan specific reasons that likely swayed the Biden administration.

The first significant issue is that the federal student loan servicers were not ready to resume payments. They lack the needed staff levels and staff training to handle a restart. The restart is likely to be frustrating for borrowers no matter when it happens, but unprepared servicers would make a bad situation even worse.

The second major student loan issue was the decision of servicer MyFedLoan. Last month MyFedLoan announced that they would not renew their servicing contract that expires in December of 2021. Dealing with the exit of a primary servicer and the restart of payments would have been chaos for borrowers. Additionally, MyFedLoan is almost certainly reducing staff in anticipation of exiting loan servicing. They would have been unwilling and unable to handle a payment restart.

Is this the final extension?

The Biden Administration is calling this the “final” extension of the relief program. This is the first time it has been called final. Previous extensions left the door open for further help.

Borrowers should plan on payments resuming in February.

While it is conceivable that an additional extension may become necessary due to the Delta Variant, the Biden Administration intends to move forward with the early 2022 payment restart.

What the Extension Means for Borrowers Chasing Forgiveness

Borrowers chasing student loan forgiveness are some of the biggest beneficiaries of the student loan payment freeze.

These borrowers haven’t been required to make payments for nearly two years, but the time still counts towards the various loan forgiveness programs, including PSLF

These borrowers will want to make sure that they are ready to resume making payments right away. If you want to avoid any issues, calling your servicer a month or two before the restart is a good idea. Verify that you are enrolled in the repayment plan you want and that payments have been correctly calculated. Resolving these issues before the restart will help prevent delays and missed months.

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