5 things to do when student loan forbearance ends

Student loan forbearance put into place due to COVID-19 will end on December 31 if lawmakers don't act. Here's how to prepare. (iStock)

In late March, the Coronavirus Aid, Relief and Economic Security Act was signed into law. The CARES Act included different types of financial relief, including a moratorium on federal student loan payments.

Most federal student loans were put into automatic forbearance through September 30, 2020, and the interest rate was set to 0% so that it wouldn't continue accruing while payments were paused. That period and 0% interest rate perk was recently extended through Jan. 31, 2021.

If you want to take advantage of low interest rates, consider refinancing your student loans — especially if you have private student loans. Online marketplace Credible can help you compare rates and lenders easily.

What to do when student loan forbearance ends

Many student loan borrowers stopped paying student loans during coronavirus. The Jan. 31 deadline is rapidly approaching. When that happens, those whose loans were in automatic forbearance will need to resume payments — and interest will once again be assessed.

Here are five things you should be prepared to do when that happens.

  1. Determine if your student loans are affected
  2. Consider student loan refinancing
  3. Start saving to cover your future bills
  4. Look into income-driven repayment options
  5. Explore other options for deferment or forbearance

1. Determine if your loans are affected

First and foremost, not all student loans were put into automatic forbearance. The CARES Act and executive order applied to most federal loans, but not FFEL or HEAL Loans owned by commercial lenders, nor to Perkins Loans issued by schools. And no private student loans were part of the COVID-19 relief.

if you have private student loans, Credible can reveal what refinance rates you qualify for. You can compare student loan refinancing rates from up to 10 lenders without affecting your credit. Plus, it's 100% free!


If your loans are from a private lender, nothing should change in January. You've always been responsible for loan payments. Or, even if your loans were put into voluntary forbearance, interest has always been accruing.

If your private loans are in forbearance now, it won't necessarily end on Jan. 31. You would have had to work out an agreement with your lender and the terms of that agreement determine when repayment will resume.

2. Consider student loan refinancing

Refinancing federal loans would involve giving up important borrower benefits, including income-driven options, flexible forbearance and deferment, and Public Service Loan Forgiveness options. But refinancing private loans simply involves a switch from one private lender to another private loan refinance lender.

It's often possible to reduce your interest rate and monthly payment by refinancing private loans, especially during this time of unprecedented low rates. If you're concerned about your ability to make payments, refinancing could help reduce your costs.

Visit Credible today to compares rates and terms from multiple lenders at once.


You can also use an online student loan refinancing calculator to see how much you could save depending on your pre-qualified rates. Remember, your best option will vary depending on what type of loans you have, so consider all possible solutions when deciding what's best for your situation.

3. Start saving money now to cover your future bills

If your loans are in automatic forbearance that's slated to end on Jan. 31, now is the time to prepare.

Hopefully, you'll be able to resume making your payments on schedule without making any drastic changes to your situation. But if you're unemployed or your hours have been reduced and you're worried about where the money will come from, start saving any spare cash now. And make a budget to cut spending now to ensure you'll have the funds available when payments come due.


4. Look into income-driven payment options

If you have federal student loans that you're worried about paying because COVID-19 has affected your earnings, consider switching to an income-driven payment plan when student loan forbearance ends.

Income-driven plans cap payments at a percentage of income and your payment could be as low as $0. If you're making payments that are too small to cover interest, your loan balance could rise on an income-driven plan. But after you make a certain number of on-time payments, any remaining balance will be forgiven so you don't have to worry about being stuck with your debt for life if you aren't making much progress on repayment.


5. Explore other options for deferment or forbearance

Although the automatic forbearance and 0% interest rate will end by January for federal loans without congressional action, that doesn't mean there are no further options for pausing payments.

Federal loans provide flexible solutions, including many opportunities to apply for deferment or forbearance outside of the special CARES Act forbearance period. If you qualify for a deferment, interest on any Subsidized Direct Loans will be covered so you won't have to worry about your balance growing. If you qualify only for forbearance, interest will continue to accrue once the 0% rate expires on Jan. 31, even if you're able to keep delaying payments.

Many private student loan lenders also allow you to request forbearance, although interest always accrues while payments are paused on private loans.

If you need more information on student loan forbearance and loan relief options potentially available to you, contact your loan provider or reach out to Credible for guidance.