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Student Loan Pause Extended to 2022

Today, the Department of Education (DOC) announced that Biden’s federal student loan pause was extended until January 31, 2022. The student loan pause was supposed to end on September 30, 2021. This student loan relief extension applies to all federal student loan monthly payments, including income-based repayment, public service loan forgiveness plans, and third-party collection activity. 

We’ll explain what this means for student loan borrowers and provide additional resources for credit card debt relief and consolidation options.

What exactly does this student loan pause mean? 

  • This is supposed to be interest-free forbearance, but it’s a much better option than regular forbearance. Your interest rates are set at zero percent and monthly payments get attributed towards loan forgiveness (i.e., for any one that’s on an income-based repayment plan that offers loan forgiveness). Consider this debt relief, more like getting approved for an income-based repayment plan with a zero dollar per month payment until after January 31, 2022. Automatically, this interest-free debt relief gets applied to all student loan borrowers, including anyone on the income-based repayment and public service loan forgiveness plan. If you choose to continue paying your student loans, you may do so by opting in on your loan servicer’s website, but why would you do that?
  • All collection activity has been paused on federal student loans with a third-party collection agency, including pending wage garnishments. No wage garnishments will occur between now and January 31, 2022. 
  • No interest is accruing during this forbearance period, unlike how interest gets capitalized to the back of the loan with regular forbearance.
  • Student loan repayment plans, including income-based repayment, will not need to be recertified until January 30, 2022. All student loan repayment plan recertifications have been pushed out for at least a year. Check with your loan servicer to see when your recertification is due. 

Did Biden Approve $70 Billion in Loan Forgiveness?

To qualify for Public Service Loan Forgiveness, you must make ten years’ worth of monthly payments on a qualified repayment plan, including the Income-Based Repayment, Income-Contingent Repayment, and Pay As You Earn Plans.

During this period while your payments are set to zero up until January 31st, 2022, the months will still be attributed to your loan forgiveness.

Congress stated; “non-payments during the Covid-19 pandemic will count for purposes of student loan forgiveness. ” So, by counting non-payments towards loan forgiveness during this Covid-relief period, Biden is canceling billions of dollars in student loan debt, which could equate to approximately $70 billion.

Should I continue making monthly payments during the student loan pause? 

If you’re trying to pay down your federal student loan balances and can afford to do so, you can continue making your monthly payments. Notify your loan servicer and let them know that you opt-out of the federal student loan pause because you want to continue making monthly payments. That would be the only reason you’d want to continue making monthly payments when the Department of Education offers you this interest-free forbearance. So instead, use the extra money to pay off high-interest debt, such as credit cards. If you have no credit card debt consider investing the extra cash. Max out your IRA if you’re not already doing so.

After the student loan pause ends on January 31, 2022, the following will occur:

  • Monthly payments resume on all federal student loans, including consolidated loans. 
  • Suppose you’re late on student loan payments or dealing with a pending garnishment. In that case, you should consider this extra time as an opportunity to fix your defaulted student loans. Take a look at this student loan rehabilitation guide to help you avoid wage garnishment and get your accounts back in good standing, current on payments, and getting the default removed from your credit. Otherwise, you could be hit with garnishment as quickly as February 2022. 
  • Everyone on an income-based repayment plan, including the Public Service Loan Forgiveness (PSLF) program, will have to get recertified as usual. Every year students on the PSLF program must provide their employer an employment verification form to confirm they work for a public service employer and submit this form to their loan servicer. You should still submit the employment certification form for 2021 if you have not done so yet, which is part of the PSLF annual requirements. 

“The payment pause has been a lifeline that allowed millions of Americans to focus on their families, health, and finances instead of student loans during the national emergency,” said U.S. Secretary of Education Miguel Cardona. “As our nation’s economy continues to recover from a deep hole, this final extension will give students and borrowers the time they need to plan for a restart and ensure a smooth pathway back to student loan repayment. It is the Department’s priority to support students and borrowers during this transition and ensure they have the resources they need to access affordable, high quality higher education.”

The Department of Education just today started notifying borrowers about this student loan pause extension. Additionally, the Biden Administration will be approving $1.5 billion in borrower defense claims, reinstating $1.3 billion in loan discharges for 41,000 borrowers who received a total and permanent disability discharge, and helping 30,000 small businesses with student loans seeking help from the Paycheck Protection Program.

For credit card debt relief

If you owe above $10,000 in unsecured loans or credit card debt, call (866) 376-9846 to learn your options. Debt counselors at Golden Financial Services are available to help. To prepare for when the student loan pause ends – apply now for student loan debt consolidation.

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