Student Loan Debt Relief Extended by Biden Administration

On August 6th, the White House announced an extension of the debt relief measures taken to protect student loan borrowers. The relief had been scheduled to end on September 30th of this year, but the Biden administration has extended the reprieve for another four months until January 31, 2022.

In March of 2020, at the outset of the coronavirus pandemic, the Trump administration paused federal student loan payments as part of the Coronavirus Aid, Relief, and Economic Security Act (Cares Act) to assist millions of Americans who were struggling as a result of businesses shutting down. The original moratorium on federal student loan debt that was scheduled to last six months has now been extended four times and will last close to two years.

Overview

The relief impacts more than 40 million Americans with federal student loans. As a result of the relief:

• Borrowers do not need to make payments on their federal student loan debt until the program expires on January 31, 2022.
• Interest is suspended, so debt balances will not be increasing during this period.
• No collections activity will take place for late payments.
• No negative payment activity will be reported to the credit bureaus.

The pause on student loan payments began in March of 2020 and will remain through the end of January, 2022.

What It Means for Borrowers

This relief applies only to those who have loans held by the Department of Education. You can see this list of service providers to see if your provider is a part of this program. Other lenders may choose to suspend payments on a voluntary basis, but they are not required to do so.

Borrowers with student loan debt do not need to take any action at this time. All payments, interest, and collection activities are automatically suspended. However, it’s advised that borrowers ensure that service providers have their updated contact information so any important messages or notifications related to the relief and the eventual reinstatement of payments and collections can be made. If you’ve moved or had a change of address, you should also update your profile at studentaid.gov.

Borrowers should be contacted by service providers before the relief ends. Borrowers will be informed when they will need to begin making payments again. If you’re not contacted by your provider, you should reach out to them. If you had automatic payments set up, those payments may begin again after the relief ends.

Another important detail of this forbearance is that the suspended payments are being counted as if they’re made on time for the purpose of qualifying for student loan relief. If you’re working towards Public Student Loan Forgiveness, it’s as if you have been making monthly payments on time since March or 2020.

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Will the Debt Be Cancelled?

Senate Majority Leader Chuck Schumer, Senator Elizabeth Warren, and Representative Ayanna Pressley wrote a joint statement saying, “While this temporary relief is welcome, it doesn’t go far enough. Our broken student loan system continues to exacerbate racial wealth gaps and hold back our entire economy.”

The group has called for the Biden administration to cancel up to $50,000 of federal student loan debt per borrower. The administration has supported up to $10,000 of forgiveness per borrower, but pressure appears to be mounting for something more significant. The administration has confirmed that a review is ongoing, but only time will tell what comes out of this.

Will There Be Another Extension?

Although the pandemic is not over and certain areas of the country have been significantly impacted by delta variant, the official release from the U.S. Department of Education made it clear that this will be the “final extension.”

As part of the release, U.S. Secretary of Education Miguel Cardona said, “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. 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 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."

With the emphasis on transitioning back to the regular payment of student loan debt, it’s clear that the Department of Education has no plans to extend the relief beyond January 31, 2022. However, the Biden administration had not planned to make this most recent extension and did take action in response to a letter from Democrats in the House and Senate. If businesses and the economy continue to be impacted by increasing cases of Covid-19, it will be interesting to see if this relief does in fact end in January as scheduled or if it is extended for a fifth time.

Should I Make Payments Anyway?

Although borrowers have not been required to make payments on federal student loan debt for almost a year and a half, payments can still be made voluntarily. Any payments that are received during the relief period will go directly toward principal and pay down the balance of the debt.

The purpose of the program is obviously to provide relief to those who cannot afford to make payments or would struggle to make ends meet if federal student loan debt needed to be paid. However, if you’re in a position where you’re able to continue making your payments (or even a smaller payment), it’s a good idea to do so.

The relief pauses interest from racking up and gives you an extended period of time to reduce the size of your loan. If you haven’t been making payments during the moratorium but you’re able to fit those payments into your budget, starting back up with your payments will put you in a better position when the relief does eventually come to an end.

When the relief ends, federal student loans will be extended, but if you want to avoid having your loan drag out, you can make payments now, even though you don’t have to.

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Avoiding Scams

Unfortunately, scammers commonly try to take advantage of student loan relief and other government programs. You need to be aware of potential scams and pay close attention to warning signs.

Whenever you’re communicating with someone related to your student loan debt, be sure that you’re dealing with someone from a legit service provider. If necessary, call the primary number of the provider to verify that the communication is legit.

Be weary of anyone or any company promising quick debt forgiveness. Don’t pay an upfront fee to get access to a repayment plan or forgiveness program. Also, don’t give out your social security number or other sensitive personal information unless you can verify that you’re giving it to a legit source.

Scammers frequently use business names that sound like government agencies or claim to be affiliated with the government. The Department of Education does not partner with businesses aside from the loan servicer providers listed here. If you’re not sure if the organization is part of the government, check the organization’s website. If it ends in .gov, it’s a government agency.

Most scammers also use high-pressure sales tactics. If someone is contacting you about student loan relief and pressuring you to make a quick decision or to take action, it’s a warning sign of a scam.