Although federal student loan payments are set to resume in May, recent polling data suggests that the vast majority of borrowers aren't financially prepared to enter repayment. To complicate matters further, millions of borrowers are being transferred to a new student loan servicer amid major policy changes from the Biden administration.
Sen. Patty Murray, D-Wash., is urging President Joe Biden to extend the student loan payment pause to give the administration time to fix broken student loan programs and help student loan borrowers better prepare to make payments.
Murray, who is chair of the Senate Committee on Health, Education, Labor & Pensions (HELP), said she is "pleased to see signs" that the president is considering extending the forbearance period and called on Biden to suspend student loan payments until 2023.
"I have heard horror stories from borrowers about hours-long phone calls with their student loan servicers trying to get questions answered, or reading through pages of fine print to figure out the best repayment program or how to consolidate loans," Murray said.
More than just an inconvenience, Murray said this is "a policy failure" with a direct negative financial impact on student loan borrowers that keeps them from seeking better employment, buying homes and starting families.
- Senator Patty Murray, D-Wash.
Keep reading to learn more about the Washington senator's proposal to fix the student loan system, as well as what you can do to resume payments if forbearance isn't extended. One strategy is to refinance your student debt to a private loan with a lower interest rate. You can visit Credible to compare student loan refinance rates for free without impacting your credit score.
Murray proposes plan to fix federal student loan system
Extending the student loan payment pause until 2023 would give the Biden administration time to address critical issues facing federal student loan borrowers, according to Murray.
"We’ve got to be clear-eyed that the cost of college is continuing to skyrocket — so to truly address the root of this problem and put our students on a path to success, the Biden administration must continue working with Congress to lower the cost of higher education and make sure it’s actually helping students get quality, high-paying jobs," she said.
Here's how Murray proposed to fix the student loan borrowing system:
- Place borrowers who were in default prior to the student loan forbearance period back into good standing and clear their negative credit histories.
- Make income-driven repayment plans (IDR) easier to access with a universally-available plan that caps monthly payments at 10% of a borrower's discretionary income.
- Expanding the relief for applicants of the Public Service Loan Forgiveness program (PSLF) by extending the deadline for the temporary PSLF waiver to ensure public servants can qualify for a loan discharge.
- Canceling some student loan debt for all borrowers, prioritizing low-income borrowers, borrowers of color, borrowers with 20+ years of repayment history and borrowers with debt but no degree.
However, not all lawmakers are on board with the idea of canceling student loan debt. The GOP Committee on Education & Labor recently told President Biden that blanket student loan forgiveness "is not a solution" to address the rising cost of college.
With uncertainty around whether the Education Department will extend the payment pause or cancel student debt, some borrowers may be considering their alternative repayment options like refinancing to a private loan. You can use Credible's student loan refinance calculator to see if this option is right for you.
Should you refinance your student loan debt?
Student loan refinancing may help you lower your monthly payments, pay off debt faster and save money in interest charges. Despite its financial advantages, refinancing isn't the right option for all borrowers. Here are a few ways to determine if you should refinance:
- Consider the type of student loans you have. Refinancing your federal student debt into a private loan would make you ineligible for IDR plans, administrative forbearance, federal deferment and select student loan forgiveness programs like PSLF. But if you already have private student loans — or if you don't plan on utilizing federal loan protections — then refinancing may be a viable option.
- See what interest rates you may qualify for. While federal student loan interest rates depend on when you originated the loan, private student loan refinancing rates are based partly on a borrower's credit score and debt-to-income ratio (DTI). You can see estimated student loan refinance rates tailored to your financial situation by getting prequalified on Credible.
- Determine if you can get help from a cosigner. Refinancing your student loans with a creditworthy cosigner, such as a trusted friend or family member, may help you lock in more favorable terms on a private student loan. Depending on the interest rate and other loan terms, refinancing may help you reduce your monthly payments and get out of debt years faster.
Before you refinance, you should also weigh your alternative repayment options like IDR plans, student loan discharge programs and financial hardship deferment. If you decide to refinance your student debt, you can compare current rates from private lenders in the table below. You can also get in touch with a knowledgeable loan expert at Credible to learn more about refinancing.
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