Forbearance is extended, so now what?

Administrative forbearance is the period during which payments to federally held student loans have been automatically paused or suspended and interest rates set to 0%. Essentially this is a pause that keeps your loans exactly as they were at the beginning of this forbearance.If you take no action, your loan and interest balances will neither increase nor decrease.

Administrative forbearance began on March 13, 2020 and was to expire at the end of September 2020. Forbearance was again extended to December 31, 2020 and January 31, 2021.and has been extended several times to address the ongoing pandemic.

On January 21, 2021 the Department of Education announced an eight month extension of protections for borrowers with federally-held student loans until at least September 30, 2021. During this time, payments to federally held student loans will continue to be automatically suspended, and no interest will accrue during this time. This was originally instituted on March 13, 2020 to provide relief and protection to student loan borrowers during the pandemic. This does not apply to privately held student loans. If you’re not sure if your loans are in administrative forbearance, you can check with your servicer online or by phone.

Now what? That depends on which types of loans you have and your financial circumstances.

If your loans are Federal loans:

Am I eligible for Administrative Forbearance?	Yes.
Struggling to pay?	Take advantage of the $0 payments and 0% interest accrual. There is no action to take – your payments are automatically paused until the forbearance expires.
Pursuing PSLF or Income Driven Forgiveness?	During forbearance, your suspended $0 payments will count toward your forgiveness progress, as long as you still meet all other eligibility criteria for your loan forgiveness program.
Want to get ahead?	While payments during administrative forbearance are automatically paused, you can choose to make manual payments to your loans. If you do so, the payment will first be applied toward any interest accrued from your last payment until March 13, 2020. Once that interest is paid, all additional payments will be applied toward principal on your loans. This is a great way to lower your principal now, so that when the forbearance expires and payments and interest do resume, the interest will be calculated on a lower principal balance. Generally, allocating your additional payment toward the loan which will have the highest interest rate once interest resumes will be the most financially advantageous. If you want more information on the best way to apply these additional payments, please log in to your Vault account and visit the “Pay Off Faster” section.
In default or delinquency?	Catch your breath: Collections and garnishments are paused during administrative forbearance for federal loans in default. Make a plan: There are several ways to deal with defaulted loans, but the most common way is to rehabilitate your loans. You’ll want to get a rehabilitation agreement in place with your servicer. This agreement determines payment amounts based on your ability to pay and you have to make nine consecutive and on-time payments to rehabilitate your loans. Once you have your agreement in place, you will not have to make your agreed upon payments during administrative forbearance. Rather, your suspended “payments” of $0 will count towards your nine months of payments needed to successfully complete rehabilitation and get back in good standing. If administrative forbearance ends before you have completed rehabilitation, you will be required to make the remainder of the nine payments based on your rehabilitation agreement. A few notes about rehabilitation: You can only rehabilitate loans one time. Rehabilitation is the only way to remove the default from your credit history.While rehabilitation will remove the default from your credit history, your missed payments will still be reflected in your credit score.

If your loans are private loans:

Am I eligible for Administrative Forbearance?	No.
Struggling to pay?	Unfortunately, private loans are not eligible for this administrative forbearance. You must continue to make payments to stay in good standing with your lender and maintain your credit. Reach out to your servicer to see what your options are. Many private lenders are offering some forbearance and deferment options to borrowers in light of the current financial challenges related to the pandemic. Make sure you carefully evaluate those options as many will allow you to pause your payments, but interest may still accrue and/or capitalize, meaning that you’ll pay more over the life of the loan.
Pursuing PSLF or Income Driven Forgiveness?	Private loans are not eligible for forgiveness.
Want to get ahead?	Interest rates for private student loans are competitive right now for qualified borrowers. If you think you might qualify for a better rate on your loans, you can explore your options to refinance your private loans. It’s always best to get a few quotes to compare rates and terms. You can log in to your Vault account and explore “Refinancing.” We have refinancers who can offer competitive rates. To explore a refinancer, click the tile for that lender and you’ll be taken to their site. Here you can provide information for the refinancer to make a “soft credit inquiry” which will not affect your credit score. The lender will provide you with a rate quote, likely for multiple term lengths. The most common are 5, 10, 15 and 20 year terms. You can model these quotes on your Vault Advisor account. Keep in mind: You don’t have to refinance every loan you have. If you have some loans with lower interest rates than the quote you received, you can choose to leave those alone and just refinance the ones with a higher rate than your quote. If you refinance a federal loan to a private loan, you lose eligibility for federal protections and programs such as this administrative forbearance, loan forgiveness and federal loan repayment programs. There is no way to make private loans federal again.
In default or delinquency?	If you are behind on payments, you should reach out to your lender to see if you can make arrangements to get on an adjusted payment plan. It’s best not to let your loans get so far behind that they get sent to collections. Be wary of predatory debt consolidation companies. It’s always best to reach out directly to your lender first to get back on track.