Outlook Money
Student loan moratoriums pause monthly repayments on student loans for a short duration. These can be incredibly helpful for borrowers facing tough economic conditions, such as natural disasters, or personal financial issues.
Borrowers can pause their student loan repayments during a moratorium. This applies to both government and private loans, with terms varying based on the lender and type of loan. This is either applied or comes in-built with some government loans.
Most government moratoriums halt interest accumulation, which usually prevents the loan balance from going up. Private lenders may, however, continue to charge interest, which would increase the total amount owed once repayments start. The borrower should get clear information about it beforehand.
Moratoriums provide relief to borrowers facing financial hardship, allowing them to focus on essential expenses, such as rent, groceries, or medical bills. This reduces the mental burden of managing hefty monthly instalments during tough times.
Moratoriums provide temporary relief, but the interest can accumulate quickly. Borrowers should have a repayment plan in place. Exploring income-based repayment options or refinancing the loan could help manage higher instalments once the moratorium ends.
In certain instances, qualification is automatic, particularly for government loans. Private loans might, however, come with conditions, such as providing evidence of financial difficulty. So, one must verify the eligibility criteria and deadlines with the lender to ensure the moratorium is applied promptly.