5 Key takeaways from Biden’s extension of student loan relief
The student loan moratorium has suspended payments, frozen interest, and postponed collections on most federal student loans since March 2020.
Here’s what student loan borrowers need to know.
Biden Administration says this is the ‘Final’ extension of the student loan pause
In its announcement on Friday, the Biden administration characterized this as the “final” extension of student loan relief to “give students and borrowers the time they need” to “restart” repayment. While there is no legal requirement that this be the final extension, and certainly anything is possible in early 2022, the Biden administration seems to be making it clear that borrowers should expect to resume repayment by February.
Student loan servicing changes may be completed by early 2022
While the Biden administration did not provide specific reasons for its decision to extend the student loan pause into 2022, advocates and lawmakers had been expressing increasing alarm over the recent announcements of two major student loan servicers — FedLoan Servicing, and Granite State Management — that they will not be renewing their servicing contracts with the Department of Education. As a result, millions of student loan borrowers will have their accounts transferred to different loan servicing companies.
If Biden had not extended the student loan moratorium, the servicing transfers would have occurred just as borrowers restart their payments, leading to potential confusion and chaos. Since FedLoan Servicing and Granite State Management’s contracts with the Department of Education end this year, the extension of the student loan payment pause to the end of January 2022 should give the Department of Education sufficient time to transition these accounts to new loan servicers before payments resume. The Department has already started notifying borrowers to prepare now for student loan servicing changes.
Suspended months will continue to count towards student loan forgiveness programs
As with the previous extensions of the student loan moratorium, the months of suspended payments should continue to count towards loan forgiveness programs, including income-driven repayment terms and Public Service Loan Forgiveness (PSLF). In other words, the suspended months will be treated as if payments are being made for purposes of these programs. The suspended months will also still count towards loan rehabilitation plans for student loan borrowers who are in the process of bringing their federal student loans out of default.
The Department of Education has updated its website to reflect the new extension, and has retained information confirming that the suspended months will be treated the same as before.
Other student loans still not covered by the student loan pause
President Biden did not expand the coverage of the student loan moratorium when he extended the relief into 2022. As a result, only government-held federal student loans, and FFEL-program student loans that are in default, are covered by the extension. FFEL-program federal student loans in good standing, federal Perkins loans, and private student loans are still excluded from relief.
Student loan cancellation?
Advocates for student loan borrowers and progressive lawmakers in Congress continue to push President Biden to enact broad student loan forgiveness. Since April, the Biden administration has been conducting a legal review of potential authorities that could be the basis for some sort of student debt cancellation via executive action. But the administration confirmed as recently as last month that the review is ongoing. The extension should give the administration the time it needs to complete this review.
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