Will the federal student loan payment break be extended?
The current suspension of student loan repayments is set to expire on January 31, 2022, following a series of extensions, meaning millions of federal student loan borrowers will be forced to pay monthly payments with interest for the first time. times since March 2020 As Progressive Democrats pressured the Biden administration to extend the hiatus further, the administration said it would be the final extension.
Overview of bank rates
The student loan payment break now ends on January 31, 2022. Borrowers should prepare to resume their scheduled payments on February 1 or consider other repayment options.
This is the last extension of the payment break
While the freeze on student loan repayments has been extended several times since March 2020, a US Department of Education press release made it clear that this will be the final expansion. This latest extension of the payment break is intended to help both borrowers and utilities while reducing the risk of default.
“As our country’s economy continues to recover from a deep hole, this latest extension will give students and borrowers the time they need to plan for the restart and ensure a smooth return to repayment,” said the Secretary of Education Miguel Cardona. “The ministry’s priority is to support students and borrowers during this transition and to ensure that they have the resources they need to access affordable, high-quality higher education. “
Democratic senators had pleaded for an extension, citing officials’ concerns
In late June, Democratic Senators Elizabeth Warren and Edward J. Markey sent a letter to all major federal student loan officers asking them to raise concerns about helping millions of borrowers transition to their homes. regular payments on October 1.
They then compiled these responses in a letter and sent them to Biden, urging him to extend the break on payments and interest until at least March 31, 2022. The letter says that most of the responses “indicate overwhelmingly that it takes longer to ensure borrowers are taken care of when they come back into payment on their student loans.”
Warren and Markey identified four major pain points:
- The payment break has allowed borrowers to make significant progress on their debt without the burden of interest.
- Most borrowers had little or no contact with their service agent during the forbearance period, meaning the transition to repayment could come as a surprise.
- Service officers need more time to assemble enough staff to support borrowers in the transition.
- PHEAA’s recent announcement that it will not extend its service contract means millions of borrowers will have to switch to new services just weeks after payments resume.
While the hiatus was not extended until March 31, as the letter requested, the extension to January is expected to alleviate some of these pain points. With a definitive end date in place, providers can better communicate with borrowers about the transition to payments.
What to expect student loan borrowers
Federal student loan borrowers should prepare to start making regular payments again in February. You will receive a billing statement from your loan manager at least 21 days before your first payment is due, and you may receive additional information about the end of the forbearance period before that. You can use the last few months of the payment break to make interest-free payments, focus on private student loan payments, or pay off high-interest debt, such as credit card debt.
However, if you’re worried about making payments again in February, you have a choice. Consider signing up for an income-based repayment plan or public service loan forgiveness if you’re looking for a lower monthly payment, or request a federal forbearance if you don’t have the resources to start the payments. You may also want to consider refinancing with a private lender if you can get a lower interest rate and don’t worry about losing federal benefits.