Three things to know before the student loan payment break ends
(NEXSTAR) – In less than 40 days, the payment pause on federal student loans should be lifted. Thanks to the COVID-19 pandemic and the actions of President Trump and President Biden, borrowers have not had to make payments and loans have not earned interest since March 2020.
This is currently expected to change on September 1, unless President Biden extends the payment moratorium again.
Here are three things you need to know before payments resume.
Preparation of payments
Payments, 0% interest rates and collection of defaulted loans are suspended until August 31.
Once the break is over, at least 21 days before your payment is due, you will receive a statement or notice, depending on the federal student aid office. This will include how much you owe and when exactly it is due. Your loan officer may already have an estimate of the payment amount and due date for you.
Until then, the FSA recommends updating your contact information on your profile with your loan officer and in your StudentAid.gov profile. With your loan officer, you will want to review or set up your direct debit enrollment.
Direct debit payments will not restart automatically for most borrowers. Instead, you’ll likely need to register to confirm registration, according to the FSA. The status of your direct debit payments will impact the type of action you need to take before payments start again.
You can also use the FSA Loan Calculator to find a repayment plan, such as an income-driven repayment plan. If you already have an income-contingent repayment (IDR) plan in place, but your income has changed recently, you may qualify for a lower payment amount.
Check your forgiveness eligibility
While the payment break is set to end next month, you still have more than three months to take advantage of a temporary waiver of a loan forgiveness program.
Earlier this month, the Department for Education sent millions of emails to borrowers urging them to check their eligibility for the Public Service Loan Forgiveness Scheme, or PSLF. The program provides loan forgiveness to public service employees after 120 eligible loan payments have been made.
Last year, a waiver of certain PSLF requirements was enacted to give borrowers credit for loan forgiveness, regardless of their federal loan type or whether they had been enrolled in a specific payment plan. , provided they have consolidated their debt into a direct loan before the end. of the waiver.
This waiver is currently due to expire after October 31, 2022, meaning eligible borrowers have less than four months to apply.
To determine if you qualify and for instructions on how to apply, click here.
Biden will soon make a decision on student loans
President Biden, when asked about student loans last week, said he would make a decision “by the end of August”.
It is still unclear exactly what this decision entails.
The Biden administration has floated the idea of waiving $10,000 per borrower, with the possibility of restrictions based on income or degree type.
There are also calls to extend the payment pause and PSLF waiver.
Richard Cordray, the head of Federal Student Aid, said earlier this year at a conference that if he pushed for the PSLF waiver to be extended, President Biden might not have the executive authority to approve such a waiver. decision.
In addition to calling for the PSLF waiver to be extended, 134 organizations recently sent a letter to Biden urging him to extend the payment pause until the proposed IDR adjustments have been processed.
Education Department Secretary Miguel Cardona previously said borrowers would be given “adequate notice” when payments resumed. When Biden announced the final payment break on April 5, payments were due to begin in less than a month.