Here’s the latest update on the ‘repayment freeze.’
For the past two years, finances have been a difficult topic for many. Millions of Americans had their hours cut, or lost their jobs altogether due to the pandemic.
Even though there were some financial relief actions put in place, such as stimulus checks, many Americans are carrying the heavy weight of debt.
For those who have federal students loans, the load was made lighter, as a freeze on student loan payments was put in place at the beginning of the pandemic, and is still in effect. This freeze allowed borrowers to stop making payments on their student loans.
Furthermore, their federal student loan balances did not accrue interest or penalties fees over the past two years, which means that the ‘freeze’ will not be counted against them.
Economists estimate that approximately $180 billion dollars in federal student loans have been put on hold over the past two years.
The freeze had been scheduled to end on May 1st, but the Biden administration has now extended it to August 31st. This means that federal student loan repayments don’ t have to start again until September of 2022.
President Biden made this statement last week, as he announced the extension:
“If [federal student] loan payments were to resume on schedule in May, analysis of recent data from the Federal Reserve suggests that millions of student loan borrowers would face significant economic hardship, and delinquencies and defaults could threaten Americans’ financial stability.”
Federal student loan repayment is still being paused until the end of August 2022.
He stated that he believes the extended the freeze will benefit borrowers: “We are still recovering from the pandemic and the unprecedented economic disruption it caused…
That additional time will assist borrowers in achieving greater financial security, and support the Department of Education’s efforts to continue improving student loan programs.”
The Department of Education has stated that anyone who took part in the student loan repayment freeze will be in good standing when they resume their payments.
Additionally, borrowers will receive an invoice in the mail at least three weeks before their payment is due. If a borrower wants to resume auto payments, they will need to contact their lender to reinstate the automatic withdrawals.
People who have had a reduction in income may be concerned about no longer being able to afford their monthly student loan payments. If a borrower is in this situation, they can apply for a repayment plan that is based on their income and the size of their household.
While this may help financially, many families will still be struggling due to a reduction in income over the past two years. Some are behind on mortgage payments and car loans, while others have a high amount of credit card debt due to outstanding medical bills. Many families are struggling in both categories.
If this describes your situation, a Chapter 13 bankruptcy could help you get back on your feet.
It can consolidate your monthly credit card payments. medical bills, and other types of debt into one (lower) monthly payment, and can also help you protect your home and car. While federal student loans can’t currently be discharged in bankruptcy, they can be paid through the Chapter 13 repayment plan, which can keep you from defaulting on your loan.
If you qualify, you may be able to file a Chapter 7 to get rid of your credit card debt and medical debt completely, without having to do a repayment plan.
I’ve been a Louisville bankruptcy attorney for 22 years, and can let you know if bankruptcy will help your specific situation, and if so, which Chapter you qualify for. I offer free phone consultations 7 days a week, and those can be scheduled any time from 8 am to 8 pm.
If you’re ready for a fresh start, you can text or call me on my cell phone at (502) 435-2593, or fill out the contact form below.
Whether you want to catch up on your mortgage to prevent a foreclosure, or you want to get rid of crushing card debt (or both), filing a Kentucky bankruptcy could possibly be the best decision you can make for you and your family.
Don’t wait — you could be a few steps away from a debt-free life, and all it takes is a text or phone call to get started!
All the best,
Tracy L. Hirsch
Louisville Bankruptcy Attorney
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