Student loan payment suspension: What the extension means for borrowers

The details on the extension, who benefits and what lies ahead.

  • By J.J. McCorvey,
  • The Wall Street Journal
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The Biden administration is extending the pause on federal student loan payments and interest through early 2022.

The Education Department said that it would uphold the moratorium, which the administration first extended earlier this year and suspends loan payments, interest accrual, and collections on defaulted loans. The pause was set to expire at the end of September 2021.

Here are the details on the extension, who will benefit and what lies ahead when it comes to student-debt legislation.

When will the payment pause end?

The payment pause has been extended until Jan. 31, 2022.

What kind of loans are eligible?

Only federal student loans are eligible for the payment pause extension.

That means all loans held by the U.S. Department of Education, including Stafford, Grad PLUS, and consolidation loans. Most loans that originated under the Federal Family Education Loan (FFEL), which was discontinued in 2010, are now owned by private lenders and are therefore ineligible. However, loans in default within the FFEL program have been made eligible for the pause on payments and interest, says Mark Kantrowitz, a student-loan expert and author of “How to Appeal for More College Financial Aid.”

Over 20 million borrowers currently have their loans in forbearance. Before the pandemic, some three million borrowers were in forbearance, according to research by Mr. Kantrowitz.

Will it be extended again?

Loan repayments and interest accrual has been paused for borrowers with federal student loans since March 13, 2020. It was extended once to the end of 2020, then extended again by President Biden by executive action until Sept. 30, 2021.

However, the Education Department said that this latest extension, to Jan. 31, would be the last for the payment and interest pause.

Can I suspend private loans?

No—the payment pause only applies to federal loans, not private ones. However, most private lenders have offered some form of pandemic forbearance upon request, which lasts for up to 90 days, Mr. Kantrowitz says.

What should I do from now until January?

Loan experts say borrowers should use the time to prepare for payments to restart.

If you have moved or will have moved by that date, for example, you should make sure your loan servicer has your current contact information so that you don’t miss important statements or notifications, says Mr. Kantrowitz.

“And so you might end up missing those payments because, well, they sent it to your last known address and it won’t be their fault,” says Mr. Kantrowitz.

Consider changing your plan to reflect your current economic circumstance, says Kristin Blagg, a senior research associate at the Urban Institute’s Center on Education Data and Policy. According to Ms. Blagg, the share of borrowers who lowered their monthly payments increased substantially, from 38.2% in February 2020 to 42.6% in August 2020, either by enrolling in an income-driven repayment program or by recertifying their income status.

“Be forward-thinking about what makes sense for you in terms of resuming payments,” such as applying for an income-driven repayment plan, says Ms. Blagg.

How can I check whether my loans qualify? Do I have to do anything to enroll?

To check your eligibility, log into your dashboard on studentaid.gov. The loan pause program is automatic and applied to all loans held by the U.S. Department of Education, Mr. Kantrowitz says.

I am in a loan-forgiveness program. Will the extension apply to me?

Yes. Under the original pause, those would-be payments counted toward your loan forgiveness, and that benefit continues under the extension, says Mr. Kantrowitz.

For example, borrowers who are enrolled in the federal government’s Public Service Loan Forgiveness program, which requires 120 payments, will have amassed a total of 23 forgiven monthly payments by the end of pause. Those months would also benefit borrowers who are enrolled in an income-driven repayment plan, Mr. Kantrowitz adds.

Is there any chance my loans will be forgiven?

President Biden has so far resisted calls by Democrats, including Sen. Elizabeth Warren of Massachusetts and Senate Majority Leader Chuck Schumer of New York, to use executive power to cancel $50,000 of student-loan debt for each borrower.

Mr. Biden has instead called on Congress to pass legislation to forgive $10,000 in individual student loans, which would prove difficult due to lack of Republican support. An official previously told The Wall Street Journal that administration lawyers were looking into whether Mr. Biden had the authority to cancel debt via executive action.

Meanwhile, Mr. Kantrowitz says borrowers shouldn’t take any steps that assume their student loans will be forgiven. But he says they also shouldn’t take any steps that would preclude them from qualifying for forgiveness.

For example, if you have federal loans, think twice about refinancing them into private loans. “There’s a good chance private loans won’t be eligible,” Mr. Kantrowitz says.

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