Student loan payment break: will it be extended?
If you have student loans, you may need to start making payments again next month.
The pause on federal student loan payments is set to expire Aug. 31, potentially marking the first time loan payments will be due since the COVID-19 pandemic began in 2020.
President Joe Biden has extended the pause on student loan repayments several times, most recently in April when he announced an extension until August 31. White House press secretary Karine Jean-Pierre confirmed at a July 27 press conference that the White House would make a policy decision by the end of August on whether the break would be extended or terminated.
“But he will make a decision. He spoke about it last week, so I’ll let him speak when he’s ready,” said Jean-Pierre.
As of August 2, there had been no policy announcements and borrowers are stuck awaiting responses.
Here’s what you need to know if you have federal student loan debt before August 31.
If student loan repayments resume…
Until a policy is set, it’s hard to say exactly what will happen once the pause on student loan repayments ends, according to Cody Hounanian, executive director of the Student Debt Crisis Center.
“We don’t know what restarting payments will look like,” Hounanian told McClatchy News. “There are a lot of unanswered questions here.”
If loan repayments resume on September 1 as scheduled, this does not mean that every borrower will receive an invoice on that day. The exact timing of when payments are due and when borrowers can enroll or re-enroll in payment plans has yet to be determined, Hounanian said.
Ahead of the potential expiration, borrowers should prepare their budgets as if payments will soon restart, according to Scott Buchanan, executive director of the Student Loan Servicing Alliance.
“Talk to your repairman. Figure out what your monthly payment will be and in your budget start putting it aside and put it in a savings account or just reserve it in your checking account,” Buchanan said. “Pretend you make this payment every month.”
If the student loan suspension is extended…
Extending the moratorium will give borrowers more time to repay their loans, regardless of their circumstances.
On the one hand, borrowers who have struggled to keep up with rising prices and other inflationary pressures will have the opportunity to prepare for the restart of payments, according to Hounanian.
On the other hand, borrowers who had more financial success during the moratorium can continue”[bettering] themselves and [contributing] to their community,” he said.
However, an extension of loan repayments does not mean that loans will disappear completely, and borrowers should always be prepared to repay their loans in the future.
“All of this is just delaying loan repayment,” Scott Buchanan, executive director of the Student Loan Servicing Alliance, told McClatchy News. “You repay the same amount. In fact, you thought you would be done repaying your loan in 2027, and now it will be 2029.”
What is the probability of an extension?
While nothing is certain, experts think it’s likely the student loan suspension could be extended so Democrats can win the support of young voters in the upcoming midterm elections.
Since April, the president has come under pressure within his party to either write off loan debt completely or extend the existing moratorium.
“There are tens of thousands of people in my district who cannot afford to buy a house, start a business or raise a family because of their student loan debt. We could allow this to continue, or we could cancel it, today,” Rep. Ilhan Omar, D-Minnesota, said in an Aug. 2 tweet.
If Biden chooses to extend the hiatus, he could do so for several months, or even into next summer, according to information from Bloomberg.
A Department of Education spokesperson told McClatchy News that the department continues to monitor the impact of the pandemic and the economy on borrowers’ ability to repay their loans, and will make a decision in consequence by the end of August.
This story was originally published August 3, 2022 10:33 a.m.