As student loan borrowers grapple with the resumption of payments, data from the U.S. Department of Education reveals that only 60% of people with federal education loans had made a payment by mid-November. With outstanding education debt in the U.S. surpassing $1.7 trillion, borrowers are facing challenges in meeting their obligations.

To alleviate the impact of resuming payments, the Biden administration has implemented a 12-month “on-ramp” to repayment, shielding borrowers from severe consequences.

Here are some options for borrowers struggling to pay their bills:

1. Deferments: Borrowers may qualify for a deferment, which can prevent their loans from accruing interest. Unemployment deferments and economic hardship deferments are available for those facing financial challenges. The maximum duration for these deferments is typically three years.
2. Forbearances: Borrowers who don’t qualify for a deferment can request forbearance, allowing them to put their loans on hold for up to three years. However, interest accrues during forbearance, potentially leading to a larger bill when it ends. Borrowers are advised to at least try to keep up with interest payments during the forbearance period.
3. Income-Driven Repayment Plans: Income-driven repayment plans cap monthly payments at a percentage of discretionary income and offer forgiveness after 20 or 25 years. The Biden administration has introduced the Saving on a Valuable Education (SAVE) plan, allowing borrowers to pay just 5% of their discretionary income toward undergraduate student loans. Calculators at Studentaid.gov or Freestudentloanadvice.org can help determine monthly payments under different plans.

These options aim to provide relief to borrowers facing financial challenges and offer alternatives to defaulting on loans. While deferments and forbearances should be considered last resorts, finding an affordable payment plan is generally recommended.

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