On Friday, the Biden administration introduced that it’s going to prolong the student loan pause, which was beforehand set to run out on the finish of September, to January 31, 2022. The student loan moratorium has suspended funds, frozen curiosity, and postponed collections on most federal student loans since March 2020.
Here’s what student loan debtors have to know.
Biden Administration Says This Is The ‘Final’ Extension Of the Student Loan Pause
In its announcement on Friday, the Biden administration characterised this because the “final” extension of student loan reduction to “give students and borrowers the time they need” to “restart” reimbursement. While there isn’t a authorized requirement that this be the ultimate extension, and positively something is feasible in early 2022, the Biden administration appears to be making it clear that debtors ought to count on to renew reimbursement by February.
Student Loan Servicing Changes May Be Completed By Early 2022
While the Biden administration didn’t present particular causes for its choice to increase the student loan pause into 2022, advocates and lawmakers had been expressing growing alarm over the current bulletins of two main student loan servicers — FedLoan Servicing, and Granite State Management — that they won’t be renewing their servicing contracts with the Department of Education. As a end result, thousands and thousands of student loan debtors could have their accounts transferred to completely different loan servicing firms.
If Biden had not prolonged the student loan moratorium, the servicing transfers would have occurred simply as debtors restart their funds, resulting in potential confusion and chaos. Since FedLoan Servicing and Granite State Management’s contracts with the Department of Education finish this 12 months, the extension of the student loan cost pause to the tip of January 2022 ought to give the Department of Education adequate time to transition these accounts to new loan servicers earlier than funds resume. The Department has already began notifying debtors to arrange now for student loan servicing adjustments.
Suspended Months Will Continue To Count Towards Student Loan Forgiveness Programs
As with the earlier extensions of the student loan moratorium, the months of suspended funds ought to proceed to depend in direction of loan forgiveness packages, together with income-driven reimbursement phrases and Public Service Loan Forgiveness (PSLF). In different phrases, the suspended months might be handled as if funds are being made for functions of those packages. The suspended months may also nonetheless depend in direction of loan rehabilitation plans for student loan debtors who’re within the technique of bringing their federal student loans out of default.
The Department of Education has up to date its web site to mirror the brand new extension, and has retained data confirming that the suspended months might be handled the identical as earlier than.
Other Student Loans Still Not Covered By The Student Loan Pause
President Biden didn’t broaden the protection of the student loan moratorium when he prolonged the reduction into 2022. As a end result, solely government-held federal student loans, and FFEL-program student loans which can be in default, are coated by the extension. FFEL-program federal student loans in good standing, federal Perkins loans, and personal student loans are nonetheless excluded from reduction.
Student Loan Cancellation?
Advocates for student loan debtors and progressive lawmakers in Congress proceed to push President Biden to enact broad student loan forgiveness. Since April, the Biden administration has been conducting a authorized overview of potential authorities that might be the premise for some kind of student debt cancellation by way of government motion. But the administration confirmed as lately as final month that the overview is ongoing. The extension ought to give the administration the time it wants to finish this overview.
Student Loan Cancellation Debate Continues Amidst Servicer Disruption
Huge Student Loan Servicing Shakeup: This Major Loan Servicer Is Ending Its Contract
Did The Biden Administration Just Send A Big Signal On Student Loan Cancellation
$125 Million In Student Debt Forgiveness Announced For 50,000 Students, Using Biden Stimulus Funds