“It kinda looks like Lucy pulling the soccer ball out.” Student borrowers got another break on payments – what next?

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President Joe Biden extended lifeline the federal government provided most student loan borrowers during the pandemic.

But this does not mean that these borrowers feel more assured of their financial health.

The ongoing pause for federal student loan repayments will now last until August 31, instead of ending May 1. Biden announced on April 6. It was the sixth extension of the payment freeze since the start of the pandemic, and the most recent – one-minute extension yet, said Anna Helhoski, student loan expert at NerdWallet.

“This extension was the closest we’ve seen to the eleventh hour so far,” Helhoski said, adding that the multiple extensions could sow doubt among those borrowers about restarting payments.

“It’s a bit like Lucy taking football away from Charlie Brown,” she said. “Borrowers aren’t sure if they really should prepare for restarting payments when the target keeps shifting.”

Ongoing uncertainty creates challenges for borrowers

Other financial experts agreed with Helhoski’s assessment. Bankrate.com analyst Sarah Foster suggested the Biden administration had given borrowers “a boost” over the past year. Last summer, the administration initially signaled that a student loan forbearance extension announced in August would be the last, though that ultimately did not happen.

“This back and forth makes it even harder for borrowers to plan ahead, but it doesn’t take away the urgency to get your finances in order,” Foster said.

While the job market has certainly rebounded since the start of the pandemic when there was a record rise in unemployment, many student loan borrowers are still struggling.

A March survey by Student Loan Hero found that 38% of those borrowers said they weren’t ready to resume payments, compared to just 28% who said they were ready. These figures are in line with another survey conducted by the personal finance website in July 2021.

About one in five borrowers continued to make payments

The pause on student loan repayments does not prevent borrowers from continuing to pay down debt. Data from Student Loan Hero suggests that around a fifth of borrowers covered by the payment moratorium have continued to pay down their debt.

There is a significant advantage to doing this. “All of their payments went directly to repay the principal” due to the interest waiver currently in place, said Michael Kitchen, senior editor at Student Loan Hero.

“On the other hand, some people used the money they would have applied to their loans to pay rent, groceries, other debts or other expenses,” Kitchen said. “And that can make sense in some situations, especially if you have higher interest rate debt, like credit cards.”

How to prepare to make payments again

While some analysts expect the Biden administration to extend payment relief again to boost Democrats’ chances in the upcoming midterm election, student borrowers should prepare for the resumption of payments.

To begin with, this means that the borrower should familiarize himself with the payment portals he will need to use. “The process for repaying your loans may be different from what it was before the pandemic because two major loan servicers let their contracts with the Department of Education expire,” Foster said.

Additionally, people in debt should plan to proactively discuss their repayment options with their managing agent. Those who are still struggling financially could benefit from income-based repayment plans that will adjust the monthly payment amount based on the borrower’s income once payments resume. Borrowers may also be able to request an additional break beyond what the federal government has mandated if they are not yet back on their feet financially.

“Keep in mind that interest will accrue on a postponement or forbearance and could increase the total amount you owe,” Helhoski said. “But if you’re between a rock and a hard place, this is a better option than the default.”

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