5 things to know about the end of the student loan payment break
Most federal student loan payments have been suspended since March of last year under the CARES Act. This same legislation also ended all efforts to collect overdue federal student loans and imposed an interest freeze. While this relief was originally supposed to last six months, former President Trump and President Biden have extended it several times.
The Biden administration has issued another extension through early 2022, and officials have made it clear that it is the last. Borrowers should therefore expect to resume repayment in just a few months.
Here’s what student borrowers need to know.
Student loan payment suspension ends in January
Biden’s most recent — and final — extension of the student loan payment moratorium ends Jan. 31, 2022. That means most borrowers will get their first bill in February 2022.
As a first step, borrowers should update their contact information with their loan officer, including phone number, mailing address, and email address, to ensure they receive important correspondence.
What the repayment will look like at the end of the student loan payment break
The Biden administration is finalizing details on what repayment will look like for borrowers when the student loan payment pause ends. As first reported by POLITICO, the administration is considering several temporary flexibilities to ease the transition to reimbursement:
- A temporary 90-day grace period during the first months of repayment, during which borrowers will not be penalized for late payments.
- Relaxed requirements to apply or re-certify income for income-driven repayment plans, including potentially allowing borrowers to apply by phone with their loan servicer to reduce application backlogs.
- Borrowers in default on their federal loans could be automatically restored to good standing.
These flexibilities have not yet been finalized, but are under discussion. In the meantime, borrowers should contact their loan servicer for details on their expected monthly payments from February. Borrowers whose financial situation has deteriorated since the start of 2020 may be able to request a recalculation of their payments under an income-based repayment plan.
Your student loan officer may change
Several major Department of Education loan managers have announced that they will be leaving the department’s federal student loan system. A change in loan servicing does not affect the terms of a borrower’s federal student loans, or a borrower’s ability to access federal student loan programs. The loan officer is only a subcontractor of the Ministry of Education.
Here’s where things stand with the loan servicing changes:
- If your student loans are managed by navigateyour loans will be transferred to a company called Maximus, which will do business as “Aidvantage”.
- If your loans are managed by FedLoan Service, your loans will be transferred to a new loan manager in the coming months, but the education department has not yet provided specific details. Some FedLoan accounts are transferred to a company called MOHELA, but the Department did not say whether all FedLoan accounts will be transferred to MOHELA.
- So far, other Department of Education departments, including Nelnet
Student loan auto debit issues
Many student borrowers have used automatic debit programs to repay their student loans. This can make it easier to manage student loans and can also allow borrowers to take advantage of modest interest rate reduction incentives. But the payment pause and service changes can have uneven impacts for borrowers who have been enrolled in direct debit programs.
According to the Department of Education, “your direct debit payments may not restart automatically when payments start again.” The Department says:
- If you were on direct debit prior to March 13, 2020, “Your agent will contact you before the suspension ends to confirm whether you wish to remain on direct debit. If you do not respond to these communications, your servicer will stop your direct debit.”
- If you signed up for direct debit after March 13, 2020, or opted out of the CARES Act payment pause, “direct debit payments will resume automatically” and no action is required.
If your student loan officer changes before February, whether or not you need to reinstate automatic debit may depend on the specifics of your situation. According to Navient, when your loans are transferred to Aidvantage, “Your autopay enrollment will automatically switch to Aidvantage, but confirmation may be required if your payments are suspended due to the coronavirus emergency.”
Conclusion: If you were in direct debit mode or if you are not at all sure of your obligations or your status, contact your loan servicer before February.
Will there be student loan forgiveness?
In April, President Biden instructed Department of Education officials to research and assess whether there is viable legal authority to allow him to unilaterally write off large-scale federal student loan debt, without Congress. . Student loan advocates and their allies in Congress have urged Biden to use executive action to write off $50,000 or more in student loan debt. Biden expressed support for some form of broad student loan forgiveness, though he did not approve of the $50,000 debt forgiveness and expressed uncertainty about his legal authority to act without it. Congress.
The White House had originally suggested that a memo outlining the findings of the legal review would be released within weeks of the April announcement, but so far the administration has provided no update. nor any details. Last week, congressional Democrats sent a letter to President Biden urging him to release the memo by Oct. 22. But the memo was not released on that date. Meanwhile, Education Secretary Miguel Cardona said earlier this week that “conversations continue” regarding the feasibility of mass student loan forgiveness.
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