President Biden Extended the Student Loan Payment Freeze Until May 2022. Here’s What You Need to Know

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President Joe Biden’s administration announced Wednesday it is extending the pause on federal student loan payments once again, until May 1, 2022. 

Student loan payments have been on hold since the start of the pandemic in March 2020. With the new extension borrowers will enjoy an additional three months of relief from payments. 

Before Wednesday’s announcement of the May 1 extension, payments were set to resume after Jan. 31. In a news release, Biden cited ongoing pandemic-related challenges faced by student loan borrowers as reason for the latest increase. Biden also asked borrowers to begin preparing now for when payments are set to resume in May.

“I’m asking all student loan borrowers to do their part as well,” Biden said in the statement. “Take full advantage of the Department of Education’s resources to help you prepare for payments to resume, look at options to lower your payments through income-based repayment plans, explore public service loan forgiveness, and make sure you are vaccinated and boosted when eligible.”

Many experts have said permanent student loan forgiveness almost certainly isn’t happening at this point, so even with the latest extension, it’s important to start planning for when payments ultimately do resume.

“You do need to start thinking about your payments because they are going to turn back on eventually — there’s no way around it,” says Robert Farrington, founder and CEO of The College Investor. “And while the promise of student loan forgiveness is enticing and exciting, I don’t think borrowers should plan on that.”

If you’re wondering how Biden and his administration will grapple with student loan debt, here’s what we know so far — and what you can do right now, regardless of what may happen.

Biden’s Long-Term Student Loan Relief Plan

Biden has announced support for a range of policy plans that require a mix of executive authority and legislation from Congress.  For example, Senator Elizabeth Warren and Senate Democratic Leader Chuck Schumer have suggested that Biden has existing executive authority to initiate broad-scale loan forgiveness with the stroke of a pen, but others argue that Biden would need Congressional approval to pass some of these measures. 

Partially Cancel Student Loan Debt

Biden has publicly supported canceling up to $10,000 in student loan debt for each borrower in response to the coronavirus pandemic, but that policy would apply only to federal student loans held by the Department of Education.

Tuition-Free College

On top of canceling student loan debt, Biden has proposed free undergraduate tuition for students who meet certain requirements. Your family’s income would have to be below $125,000 per year to qualify, and the plan would apply only to two- and four-year public colleges and universities, not private schools. The only exception to that is if you attend a private historically Black college or university (HBCU) or a minority-serving institution (MSI). Keep in mind there are 17 states that already offer tuition-free community college programs (here’s a list).

Student Loan Repayment

Under Biden’s plan, the current income-driven repayment plans for federal student loans would become more generous. Anyone making $25,000 or less annually would not owe any payments on their undergraduate federal student loans, and no interest would accrue on those loans. 

For anyone who makes over $25,000, Biden would limit loan repayment for federal student loans to 5% of discretionary income (income minus taxes and essential spending, such as housing and food). 

After 20 years of making payments through an income-driven repayment plan, the remainder of the loans would be forgiven, and you would not owe income tax on the amount forgiven. Biden also wants to make enrollment in income-driven repayment plans automatic. 

Public Service Loan Forgiveness

Biden supports ,000 in student loan forgiveness in five years under the Public Service Loan Forgiveness (PSLF) program. That’s shorter than the existing forgiveness program, which is 120 monthly payments or 10 years, but the amount would be capped at $50,000. There’s no maximum with the current PSLF program. Biden also wants to automate the enrollment process for this program.

Student Loan Forbearance Under Biden

Now that we know that the pause on student loan repayments has been extended for an additional six months, we answered questions you may have regarding the student loan payment pause and 0% interest period.

Will the student loan forbearance get extended?

The Department of Education has extended federal student loan forbearance until Jan. 31, 2022. 

What’s the earliest my payment could be due?

Student loan payments will resume at the end of January, but that’s not necessarily when your student loan payments are due. Look out for a billing statement or some notice from your loan servicer in the next few months to find out your specific due date. The Department of Education suggests visiting its FAQ page regularly between now and then for any general updates.

What if I want to continue making payments?

Any payments you make during the forbearance period will be applied to principal once all the interest that accrued before March 13, 2020 and any fees (for defaulted loans) are paid.

Making any voluntary payments right now will help you pay down your loan balance faster, but Farnoosh Torabi, editor-at-large of personal finance at CNET (which is owned by Red Ventures, like NextAdvisor) and host of the podcast “So Money,” says you shouldn’t worry about paying down your student loans too aggressively this year. You should instead focus on building an emergency fund or paying off high-interest debt.

“Even if we’re to believe that the loans will come due again in early 2021, I don’t recommend working extra hard to erase your government loans this year. Pay the minimums, as needed, but not a penny more,” Torabi writes.

If you’re determined to pay down your student loans right now, these strategies can help you. 

Does the forbearance period start repayment over?

No, your student loans are in limbo. If you haven’t made any voluntary payments toward your student loan debt, you’re in the same position you were roughly a year ago. 

For example, if you were on a traditional repayment plan before March 13, 2020, then your repayment status will be for the same total number of months as it would have been before. That means it won’t necessarily take longer to pay off your loans, but rather the expected payoff date is pushed back. You always have the option to pay off your student loan debt sooner. 

An income-driven repayment plan operates differently and suspended payments during this forbearance period still count toward forgiveness, so be sure to talk to your loan servicer if you have specific questions regarding your repayment status.

How to Take Control of Your Student Loan Debt Right Now

Even though Biden has promised to grant widespread student loan forgiveness, it hasn’t happened yet. That’s why it’s in your best interest to hope for the best, but plan for the worst. We compiled tips from experts on how to take control of your student loan debt right now.

1. Talk to Your Loan Servicer

You don’t have to contact your student loan servicer or take any specific action to temporarily suspend your payments, but it’s important to check in with your servicer, as well as check your mail or email for up-to-date information about your loans and the forbearance period. Make sure your address and email is up-to-date in your online portal. Your loan servicer should always be your go-to resource for any specific concerns or questions.

2. Review Your Budget and Make a Plan

Now is a great opportunity to review your finances and make a plan for resuming payments. You may need to cut spending in certain areas to make sure you have room in your budget for when payment is due or pull from your emergency fund. Even though the forbearance period has been extended, it’s still a good idea to take this time to prepare for the future. Sooner or later, your monthly payments will start again and it’s better to be ahead of the curve.

3. Consider an Income-Driven Repayment Plan (IDR)

This type of repayment plan can lead to lower, more affordable monthly payments, depending on your taxable income and family size. For example, if you earn less than 150% of the federal poverty line, your payments could be as low as $0. 

“The biggest thing we’ve been recommending all borrowers do over the last couple of months in preparation for their payments potentially starting again is confirming that they’re on the most affordable repayment plan,” says Ferastoaru.

To enroll, go to this federal student aid page, click on “apply now” at the top, and start an application. If you’re already on an IDR plan and your income has changed because of COVID-19, ask your lender to re-verify your income before payments restart. If you’re on an IDR plan and make all your payments on time, your loans will be forgiven at the end of the repayment period — even if they aren’t fully repaid.

4. Look Into Other Deferment or Forbearance Options

If an income-driven repayment plan is not affordable, you can potentially request a different type of forbearance or deferment after this forbearance period, says Ferastoaru. Additional deferment and forbearance outside of COVID-19 relief can give you more time to get back on your feet, but should be a last resort. 

For example, there’s unemployment deferment, which temporarily suspends payments on your student loans. It covers your interest for subsidized student loans, but not unsubsidized loans, and is limited to three years. 

There’s also economic hardship deferment, which is similar to unemployment deferment, except you have to receive federal or state public assistance, earn below 150% of the federal poverty line, and work at least 30 hours per week to qualify. The last option is applying for federal forbearance, which can last up to three years. But unlike a deferment, the government won’t cover any of the interest on your loan.