man with coffee at desk

How to Prepare for When Federal Student Loan Relief Ends

For people waiting to know President Joe Biden’s plans for cancelling student debt, an idea he supported on the campaign trail, he recently gave a hint. In a New York Times article, dated May 20, Biden is quoted saying: “The idea that you go to [the University of Pennsylvania] and you’re paying a total of 70,000 bucks a year and the public should pay for that? I don’t agree.”

According to the writer David Brooks, Biden is “suspicious of the generous college debt forgiveness plans that have sprung up on the left.”

Whether this means that the cancellation of $50,000 in school debt, a figure supported by such progressives as Senator Elizabeth Warren and Representative Alexandria Ocasio-Cortez, or even just $10,000, is off the table—only time will tell. In the meantime, borrowers may be counting the months till September, when the payment and 0% interest holiday they’ve been enjoying since the passage of the CARES Act is set to expire.

Thanks to the CARES Act and subsequent executive orders, student loan payments have been suspended and interest rates set at 0% — plus there has been a moratorium on collections and wage garnishment for borrowers who had defaulted on some types of federally held student loans. The relief was originally set to end on Sept. 30, 2020, but was extended first to the end of last year, then to Jan. 31, 2021, and finally by President Biden to Sept. 30, 2021.

As a candidate, Biden ran on a platform that included student loan reform, but the majority of his proposed actions would require congressional approval—a process that can take months or even years after an act is introduced to process and pass. More recently, the president asked the Department of Education to study whether he could cancel student debt by executive order.

Until President Biden announces his plans for student debt, borrowers who don’t want to be caught flat-footed may want to prepare for the different circumstances that may arise.

Keep Up With the News

There’s been a lot of talk about the future of student debt. But it’s important to assess what action is being taken on the executive level in regard to federally held student loan payment suspension and other COVID-19 relief strategies.

(To be clear, the forbearance applied to defaulted and nondefaulted Direct loans, defaulted and nondefaulted FFEL Program loans, defaulted and nondefaulted Federal Perkins Loans, and defaulted HEAL loans—if those loans are owned by the Department of Education.)

One of President Biden’s first steps after taking office was to extend the payment pause and 0% interest for federally held student loans till Sept. 30. Since then, he has signed a $1.9 trillion COVID relief bill and introduced a $2.3 infrastructure package and $1.8 trillion American Families Plan. He has said his proposals are up for negotiation, but neither provides for student debt cancellation. That said, as noted earlier, he is looking into whether he has the executive authority to forgive student loans.

Paying attention to breaking news about federal student loan can help you assess next steps and make a plan.

Read Incoming Communications


If there are no new student loan relief measures, borrowers will start to receive notices from their federal student loan servicers as September approaches. It’d be a good idea to read them, as they will contain information about the date that loan payments will resume and provide information on the federal government’s loan repayment plans.

Loan servicers may try to reach you by phone, mail, or email, so make sure you have updated information on file, especially if you moved or are not regularly at your mailing address.

Borrowers may notice that their loan payoff period is longer. That’s because the forbearance period was a break, but no part of the loan is forgiven. The loan is still expected to be paid in full.

There is, however, an exception for borrowers on income-driven repayment plans. The suspension will be credited toward their loan payments.

Borrowers who are part of the Public Service Loan Forgiveness plan may also receive credit for the suspended payments if they fulfill certain qualifications, including having a federal Direct loan, being on a qualified payment plan before the forbearance period, and working a minimum 30-hour week.

Those who were laid off or furloughed may not qualify. These specifics can make it tough to know how much you’re expected to pay, so if you have questions, contact your loan servicer before payments restart.

Assess Your Options

Many people are in very different circumstances from when the payment moratorium first took effect. Borrowers may need to take a look at their budget and assess how their federal student loan payments fit into their current financial picture.

Some may have no problem resuming payments. Others may want to consider refinancing or consolidation. With payments on pause, it can be a good time to explore options.

Consider Restarting Automatic Payments Early

Some borrowers in a position to resume student loan payments have already done so, or continued to make monthly payments even though it was not required. This move allowed them to take advantage of 0% interest and likely paid down the principal on their student loan.

As September looms, it may make sense to assess your budget and see what it would look like if you have to resume federal student loan payments.

Borrowers who decide to resume payments can contact their loan servicer to restart automatic payments. It may also be a good idea to ensure that any payments made during the relief period are going to the principal of the loan. You can clarify this with your servicer.

Consider an Income-Driven Repayment Plan

There are four income-driven repayment plans. Most federal student loans are eligible for at least one:

•  Pay As You Earn (PAYE)

•  Revised Pay As You Earn (REPAYE)

•  Income-Based Repayment Plan

•  Income-Contingent Repayment Plan

Eligibility depends on your type of loan and your circumstances, but the commonality for all is that your payment is set at an amount that is “affordable based on your income and family size.” If you qualify, you’ll pay a certain amount of your discretionary income over a set period of time. After that period is over, the loan may be forgiven.

For example, under REPAYE, you’ll typically pay 10% of your discretionary income for 20 years (25 if the loans were graduate school or professional study loans). It may take less than 20 years to pay off your loans, especially if your income rises.

For any income-driven repayment plan, periods of deferment due to economic hardship (such as a job loss) will count toward your repayment period, so you would not be paying loans beyond the set amount of time set by the repayment plan.

Federal income-based payment programs require you to recertify your income every year, and your repayment changes based on income and family size.

Some borrowers find that the unknown is tough to navigate and prefer setting autopayments that do not change unless the loan is refinanced, consolidated, or put into deferment.

Another consideration of income-driven repayment plans is that, as of now, any amount forgiven after the repayment period is considered taxable income.

Apply for Additional Relief

The CARES Act and subsequent executive action recognized that COVID created economic uncertainty on a national scale. But there are other options available for deferral or forbearance if a federal student loan borrower is struggling with finances.

Forbearance and deferral pause payments, but they may differ in interest accrual rules. Qualifications for either depend on your type of loan and reason for requesting forbearance or deferral.

Under forbearance, interest will usually accrue during the period, which will increase a borrower’s balance and lead them to pay more over the life of the loan. During deferment of a federal student loan, interest does not typically accrue.

Consider Consolidating Loans

Consolidation allows borrowers with more than one federal student loan to combine them into one loan with a fixed interest rate that is the average of the rates of the loans being consolidated (rounded up to the nearest one-eighth of a percentage point).

Borrowers may see a change in monthly payments when they consolidate their loans into a Direct Consolidation Loan, but one of the biggest benefits is convenience. Instead of multiple loans to track each month and multiple payments, there is one payment a month, at a fixed interest rate.

The length of the loan term also may change, so it’s important for borrowers to consider the length and interest paid over time, as well as the monthly payment, to assess whether the consolidation makes sense for their financial goals.

Then There’s Refinancing

Interest rates on many lending products offered by private lenders are at near-historic lows, thanks to the Federal Reserve’s near zero interest rate. On April 29, the Fed announced that it will maintain interest rates at 0.10%.

Deciding to refinance federal student loans depends on a number of factors. One thing that is important to note is that refinancing federally held student loans with a private lender means the loans are no longer federal loans and as such, are no longer subject to federal benefits like income-driven repayment plans, Public Service Loan Forgiveness, or federal forbearance.

If you refinance your student loans, a new, private loan will pay off the federal student loans, meaning you will have a new lender. Refinancing can be a good choice for working graduates who have high-interest Direct Unsubsidized Loans, Graduate PLUS loans, and/or private loans. Again, those who refinance will have the ease of one loan and one monthly payment.

It’s important to read the fine print and compare offers among lenders. Some companies provide benefits that may ease concerns about the future. For example, SoFi® offers unemployment protection to eligible members, allowing them to pause loan payments if they were to lose their job through no fault of their own.

It’s also important to understand interest rates, and how a variable rate could affect payments if interest rates were to rise. Different lenders also may have fees.

Comparing options, plugging in numbers, and weighing different scenarios based on your current financial picture and your goals may be helpful in assessing whether refinancing is an option for you.

SoFi® refinances student loans with low fixed or variable interest rates. SoFi also offers flexible terms, and no application or origination fees. Members get access to career coaching, member events, and more—at no cost.

The Takeaway

While there may be a lot up in the air, existing student loans aren’t likely to disappear any time soon.

Understanding the repayment options available can help borrowers make a plan to handle their debt when federal student loan relief ends.

Learn more about student loan refinancing today.
Learn More

1Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. A hard credit pull, which may impact your credit score, is required if you apply for a SoFi product after being pre-qualified.
SoFi Student Loan Refinance
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.

SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp. or an affiliate (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

All your finances.
All in one app.

SoFi QR code, Download now, scan this with your phone’s camera

All your finances.
All in one app.

App Store rating

SoFi iOS App, Download on the App Store SoFi Android App, Get it on Google Play

ABOUT SoFi SoFi helps people achieve financial independence to realize their ambitions. Our products for borrowing, saving, spending, investing, and protecting give our more than one million members fast access to tools to get their money right. SoFi membership comes with the key essentials for getting ahead, including career advisors and connection to a thriving community of like-minded, ambitious people. For more information, visit Want an easy and convenient way to manage your financial life? Get the SoFi app. For iOS and Android.

TLS 1.2 Encrypted
Equal Housing Lender