Some borrowers that chose not to pay during the time may have used the opportunity to build an emergency fund, invest, or work towards other financial goals. However, with millions of Americans filing for unemployment, it’s likely many struggling borrowers used that money to pay for other essential expenses.
Most federal loans are also eligible for an income-driven repayment plan. This allows borrowers to make monthly payments based on their income and family size and could be as low as $0. However, with those low payments, interest will still be accruing and the loan size will increase.
For those working in a public service job, such as a teacher, doctor, or police officer, there is a chance to qualify for Public Service Loan Forgiveness. After 120 qualifying payments and meeting the annual requirements, a borrower can receive loan forgiveness.
Some borrowers with steady income may consider refinancing student loans, especially if they have a high interest private loan. However, all federal loan borrowers should think carefully and be cautious about refinancing federal loans. Refinancing federal loans into a private student loans means a loss in several benefits – income-driven repayment plans, potential for loan forgiveness, generous deferment periods, and potential for subsidized loans.