With the coming end of the federal student loan freeze, universities and colleges in Iowa are educating their students on the next steps to repay their loans.
The US Department of Education suspended federal student loan payments in March 2020. Former President Donald Trump and President Joe Biden have repeatedly extended forbearance amid the COVID-19 pandemic. Without further extension, the freeze is expected to end on September 30.
While loan departments are responsible for contacting graduates, the University of Northern Iowa has been working with current students and recent graduates to understand what the end of the freeze means for them, said the director of the financial aid, Tim Bakula.
“I think ending the freeze is a priority for many people who have had their loans during this forbearance period over the past 16 months,” he said. “As a university in this field, we want to make sure our borrowers understand their options and help them avoid default by making the right decisions for themselves.”
Iowans owe $ 12.8 billion in student loans, while the total amount owed by Americans is over$ 1.7 trillion.Iowa College Aid estimated in 2019 average debt at graduation at private nonprofit colleges and universities in Iowa was $ 34,199, and 74% of students graduated with some debt. At state regent universities, it was $ 27,502, with 55% of graduates leaving in debt.
It’s time to reassess
With two and a half months of the end of the freeze, students still have time to reassess their debt repayment plans, said Elizabeth Keest Sedrel of Iowa College Aid.
“For anyone whose circumstances have changed or for anyone who has just taken the default options, this is a golden opportunity to look at the options and decide what would make sense,” she said. . “Whether it’s a fixed plan with the same monthly payments, a progressive plan where payments increase over time, or an income-based plan, now is the perfect time to reassess. “
Keest Sedrel said now is the time for recent graduates to check with loan services and make sure they have the best option for them before payments start again in October.
University of Iowa director of financial literacy Kelsey Ryder said students should take the time to better understand federal loans in general.
“Because they’ve been on hiatus for so long, I really think it’s important for students who have or haven’t experienced repayment to understand the basics of repaying loans,” he said. she declared. “They need to know their loan officers and update their contact details with the entity.”
Students who graduated during the pandemic or who are graduating this academic year should know if they have a subsidized or unsubsidized loan to plan their next steps, she said.
One of Bakula’s fears is that uninformed students will default on their loans. He said this is one of the reasons his department is striving to continue educating students about forbearance.
“Students who have not paid since the start of the pandemic may be at greater risk of defaulting simply because they have become used to not having to make payment,” he said. “It is essential that we get them back on track. “
Potential student loan extensions
US Representative Robert Scott, D-Virginia, and US Senator Patty Murray, D-Washington, sent a letter to Biden suggesting an extension until “early 2022”. Their plan also suggested involving “several proven methods of contacting borrowers” to ensure graduates understand their repayment dates.
Institutions in Iowa are struggling to ensure their students are not confused about the impending end of forbearance. Drake University’s director of financial aid Ryan Zantingh said his department was reluctant to send reminders in case the date changed.
“Part of the reason we haven’t been more proactive with our students is that we don’t know if it will be extended,” he said. “If the date is pushed back again, it only adds to the uncertainty and confusion for the students.”
At the University of Northern Iowa, Bakula said his office continues to educate students about the extensions, but that can be confusing. Withdrawing information due to extensions only increased confusion among students, he said.
Ryder said the University of Iowa’s financial aid department is used to things changing frequently, but it’s difficult to inform students without knowing whether or not there will be an extension. gel.
“Since the payments depend on what student loan managers decide, we don’t want to create additional confusion over who they pay, when or how much,” she said. “We don’t want to misinform them about the dates either.”
In addition to not knowing whether the forbearance will be extended in the future, the Department of Education and loan managers have not given a clear plan to onboard the thousands of new graduates who will start paying off their loans in the future. October alongside people who have been paying for years – something Bakula said he is concerned about.
“If you think about the magnitude of this (situation), it’s not as simple as flipping a switch,” he said. “I think a lot of things at the federal level are still being resolved before colleges or students get more information, so that will also be something to watch out for over the next few weeks.”
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