Editors Note: Since the writing of this article, the federal Student Loan Debt Relief program has been blocked and the Department of Justice has filed an appeal with the Supreme Court. While the case is being reviewed, the Biden administration is extending the federal student loan payment pause into 2023. The US Department of Education announced loan repayments may resume as late as 60 days after June 30, 2023.
If you have federal student loans, you’ve enjoyed a payment and interest pause of over two years, unless you’re one of the few who’ve gone on and made payments. Will student loan forbearance be extended yet again, and if not, can you extend or pause repayment through general means?
The pause on payments has given 43 million borrowers who hold $1.61 trillion in federal debt a break. If this situation applies to you, here’s what you need to know about the student loan forbearance extension, whether a student loan payment holiday might continue, and standard ways to manage payments.
What Is a Student Loan Forbearance Extension?
The government forbearance — suspending loan payments and collections on defaulted loans and setting a 0% interest rate on almost all federally held student loans — started in March 2020 and was extended several times because of the Covid pandemic and its economic fallout.
The Biden administration threw a life preserver to student loan borrowers who were set to resume payments with interest starting on Feb. 1, 2022, extending the payment pause through May 1, 2022.
Many private student loan lenders also offered a payment pause or loan modification.
Recommended: What is Student Loan Forbearance?
Reasons for a Student Loan Forbearance Extension in 2021
COVID-19 Variant’s Impact
Because of the impact of the omicron variant, the Biden administration has said that student loan borrowers were not ready to resume payments.
Between Dec. 10, 2021, the date White House officials announced that student loan payments would resume on Feb. 1, 2022, and Dec. 22, when they announced the new May 1 deadline, new U.S. Covid cases grew from 134,474 to 242,822 daily, according to the Centers for Disease Control and Prevention.
Time to Adjust Repayment Schedules
The additional extension gives borrowers more time to get ready to resume payments, and it also gives the student loan system (the government and the loan servicers it hires) to get ready for millions of borrowers to start repaying again.
Reduction of Delinquency and Defaults
Giving borrowers more time may reduce the risk of delinquency and defaults after the pause on student loan payments ends. It could help borrowers in periods of transition adjust to start repaying again.
A Smoother Transition
Student loan borrowers could face a smooth transition for repayment through the improvement of student loan servicing. The federal government, in the meantime, may be able to help borrowers streamline repayment, simplify forgiveness programs, consider the role of interest in repayment, and help distressed borrowers.
Will Student Loan Forbearance Be Extended?
What about after May 1? Will student loan forbearance be extended again?
The Biden administration promised student loan borrowers payments would resume on Feb. 1, 2022 — but that’s before the administration announced the third extension in December. The Department of Education also warned that it would be the final extension, but then Biden made his surprise announcement to extend the forbearance 90 days.
March brought new hints of another possible extension.
“The president is going to look at what we should do on student debt before the pause expires, or he’ll extend the pause,” White House Chief of Staff Ron Klain said.
Democrats continue to push for further forbearance and believe that resuming payments could prove detrimental to borrowers’ Covid-era recovery. Some Democrats advocate for cancellation of up to $50,000 in federal student loan debt for each borrower. However, can the president cancel student loan debt?
Some Democrats believe that Biden can achieve student debt cancellation by executive order, but Biden and Speaker of the House Nancy Pelosi have said they do not believe that’s possible.
Steps to Take Before the Student Loan Forbearance Ends
Before the student loan forbearance ends, take a look at a few steps you can take:
• Watch for your billing statement, which should arrive at least 21 days before your first payment is due, or additional communication.
• Update your contact information with the loan servicer and at StudentAid.gov . That way, you’ll learn about your new payment due date, payment amount, and even another pause.
• Update your bank account information if necessary, particularly if your loan servicer has changed. You may want to establish automatic payments with the new servicer, and even if your loan servicer hasn’t changed, you’ll need to confirm any autopay arrangement with your current servicer.
• Avoid missing a payment by signing up for automatic payments.
• Update your income information when you have an income-driven repayment plan, particularly if income has decreased.
• Go over your budget and determine whether you can make your loan payments. If not, contact your loan servicer to ask about your options.
Loans Eligible for the Federal Payment Pause
Let’s take a quick look at the loans covered by the administrative forbearance and those that have not been eligible.
|Eligible Loans||Ineligible Loans|
|Direct Loans (including defaulted loans)||FFEL Program Loans (without a default) commercially held|
|Federal Family Education Loan (FFEL) Program loans held by the Department of Education (including defaulted loans)||Federal Perkins Loans (both defaulted and non-defaulted) not held by the Department of Education|
|Federal Perkins Loans held by the Department of Education (including defaulted loans)||Non-defaulted HEAL Loans|
|Defaulted FFEL Program Loans not held by the Department of Education||Private student loans|
|Defaulted Health Education Assistance Loan (HEAL) Loans|
How to Extend or Pause Student Loan Payments in General
If you’re concerned about your ability to resume student loan payments, consider talking to your loan servicer about:
• General student loan forbearance
• General student loan deferment
• An income-driven repayment plan
• The Extended Repayment Plan
• Public Service Loan Forgiveness
• Refinancing federal or private student loans with a private lender
Here’s more detail on two of those ideas:
Recommended: Student loan Student Loan Deferment vs Forbearance.
Based on your income and family size, an income-driven repayment plan sets your student loan payments at an affordable repayment amount per month for you. There are four plans, which last from 20 to 25 years and forgive any remaining balance after that.
• Revised Pay As You Earn Repayment Plan
• Pay As You Earn Repayment Plan
Contact your loan servicer to discuss income-driven repayment plans or apply on the Federal Student Aid.
Refinancing higher-interest student loans with private lenders result in one new loan, ideally with a lower interest rate. If you’re interested in tips on refinancing student loans, know your types of loans and do the math.
If you refinance federal student loans, realize that they will no longer be eligible for federal programs like income-driven repayment plans.
Most lenders offer a fixed or variable interest rate and terms of up to 20 years. It might be a good idea to look for a lender that offers some kind of forbearance.
Recommended: Types of Federal Student Loans
Alternative Student Loan Financing Options
As you’re thinking about college funding, keep this in mind: You can choose from a number of college financing options, including scholarships, grants, and private student loans.
• Scholarships: Scholarships are awarded based on merit or need, and students do not need to repay them. Students can get scholarships through businesses, colleges, and other organizations.
• Direct PLUS Loans: Direct PLUS Loans can help graduate or professional students pay for college. They can also help parents of dependent undergraduate students pay for their child’s college education. You might want to consider a parent PLUS loan refi to a lower rate if you’re repaying a PLUS loan.
• Grants: Students can get grants from states, the federal government, a public body, and/or other organizations to pay for college.
• Private student loans: Private student loans are given by commercial lenders, not the Department of Education. Unlike most federal student loans, you will undergo a credit check and possibly have to get a cosigner to sign on the loan with you.
The end of the latest student loan forbearance extension is bearing down. If you anticipate a struggle resuming payments, it might be a good time to hatch a plan.
Refinancing one or more private or federal student loans to a different rate and term is an option.
SoFi offers student loan refinancing with low fixed or variable rates and flexible terms. And SoFi has a forbearance plan.
SoFi Student Loan Refinance
If you are looking to refinance federal student loans, please be aware that the White House has announced up to $20,000 of student loan forgiveness for Pell Grant recipients and $10,000 for qualifying borrowers whose student loans are federally held. Additionally, the federal student loan payment pause and interest holiday has been extended beyond December 31, 2022. Please carefully consider these changes before refinancing federally held loans with SoFi, since the amount or portion of your federal student debt that you refinance will no longer qualify for the federal loan payment suspension, interest waiver, or any other current or future benefits applicable to federal loans. If you qualify for federal student loan forgiveness and still wish to refinance, leave unrefinanced the amount you expect to be forgiven to receive your federal benefit.
CLICK HERE for more information.
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.
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.
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