Federal Student Loan Forbearance Extended One Last Time

Update, 8/24/2022: On August 24, 2022, President Biden announced his plan to forgive up to $10,000 in federal student loan debt and up to $20,000 for Pell Grant recipients. The debt forgiveness will be limited to borrowers with incomes of less than $125,000 a year or families earning less than $250,000. In addition, the Biden administration has extended the payment pause on federal student loans until December 31, 2022, with payments to resume in January 2023.

If you have federal student loans, you haven’t had to make any payments since March 2020. Due to the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the government suspended federal loan payments and set interest rates on existing loans at 0%. 

Initially, the federal loan emergency forbearance program was supposed to last a few months. But as the pandemic continued to impact people’s jobs, the government extended federal student loan forbearance multiple times. 

On August 6, the U.S. Department of Education announced that there would be one more extension of the CARES Act’s student loan protections. According to the Department’s press release, this will be the final student loan extension and has a definitive end date. Here’s what you should know about the latest extension, when it ends, and what you should be doing over the next few months to prepare for repayment.

President Biden Extends Student Loan Payment Freeze

According to the latest data from Federal Student Aid, approximately 43 million people in the United States have outstanding federal student loans. The CARES Act’s student loan relief measures applied to borrowers with federal loans owned by the Department of Education, which makes up the vast majority of federal loans. 

The CARES Act was supposed to end on September 30, 2021. However, there were a few indications that the end date was going to change: 

• Input from loan servicers: Senators Elizabeth Warren and Ed Markey sent loan servicers a survey asking them about their readiness to handle student loan payments once the federal payment freeze ended. Servicers responded that they were short-staffed and lacked direction from the Department of Education on how to handle repayment resuming.

• Upcoming changes in the federal loan system: Two federal loan servicers, FedLoan Servicing and Great Lakes Educational Loan Servicers, announced that they were not renewing their federal loan contracts, and they would stop servicing federal loans after December 31, 2021. Combined, those two servicers manage the loans of over 10 million federal borrowers. Without a plan in place, having students enter repayment as their loans transitioned to new servicers would have been difficult. 

• Concerns about borrowers: Many government officials raised concerns about borrowers’ readiness to repay their loans after the CARES Act’s protections ended. According to a survey by The Pew Charitable Trusts, 67% of federal loan borrowers said it would be difficult for them to afford their loan payments if repayment resumed in October as scheduled. 

With those issues, President Biden and his administration decided to extend the CARES Act’s student loan protections one final time. Now, the payment pause and other relief measures are scheduled to end on January 31, 2022, with payments and interest accruals beginning in February.

What Student Loan Protections Are Extended? 

This last update extends the following student loan relief measures: 

• Payment suspension: Federal loan payments are suspended, so borrowers will not have to make payments until February 2022. 
• Interest Waiver: Interest rates on federal loans are set at 0% for the duration of the emergency relief period. No interest charges will accrue until February 2022. 
• Collections activity: If you defaulted on your student loans and they’re in collections, the CARES Act also suspended all collections activities. Collection agencies cannot call you or send billing statements.

4 Things To Do Before January 31, 2022

While the federal student loan forbearance plan has been extended, the Department of Education was very clear in stating that this was the last extension. You should expect the payment suspension and interest waiver to end on January 31, 2022, and for your loans to enter into repayment in February. 

Before January 31 arrives, here are four things you can do to prepare for federal student loan payments to resume: 

1. Check Your Loan Information

Since you likely haven’t checked on your loans since March 2020, a lot may have changed. You may have a new address or email, and your loans may have been transferred to a new lender. Before federal student loan payments resume, it’s a good idea to check on your loans to ensure the loan servicer has your correct contact information and that you know what your payments are. 

If you’re not sure who your loan servicer is, you can use your Federal Student Aid ID to log into the National Student Loan Data System. It will list what loans you have, what loan servicer manages them, and how much you owe. 

[Note: If your current servicer is FedLoan or Great Lakes, your loans will be transferred to another loan servicer before repayment begins. Look for notifications from your loan servicer to find out who will be handling your loans from now on.]

2. Apply for a New Payment Plan

While payments aren’t required yet, it’s smart to think ahead. If your payments are higher than you can afford, you may be able to apply for an income-driven repayment (IDR) plan. Under IDR plans, your loan term will be extended from 10 years to 20 or 25 years. The loan servicer will use a percentage of your discretionary income to determine your payments, potentially slashing your payments. 

You can use the Department of Education’s Loan Simulator tool to find out which IDR plan is best for you and fill out an application. 

3. Update Your Autopay Settings

In February, payments will be due. If you have automatic payments set up, your loan servicer will deduct your payment from your bank account on the designated day listed on your account. 

If you haven’t checked your payment amount or date in a while, log in to make sure it still fits your budget and schedule. For example, you may want to reduce your payment amount if you were paying more than the minimum. Or, you may want to change your payment date so it coincides with your new job’s paydays. 

4. Research Student Loan Refinancing

Depending on your situation, student loan refinancing may be another strategy for managing your debt. When you refinance, you can potentially qualify for a lower interest rate or a different repayment term and save money over the life of your loans. If you have a mix of federal and private student loans, refinancing will allow you to combine them together, simplifying your payments. 

However, there is a major downside to refinancing federal loans. Once your loans are refinanced, they’re no longer eligible for federal programs or benefits like IDR plans, loan forgiveness, or federal forbearance. 

If you decide that refinancing’s advantages outweigh its drawbacks, you can get a rate quote from ELFI without affecting your credit score with the Find My Rate tool.*

Handling Your Debt

For the past 18 months, you haven’t had to worry about federal loan payments or interest charges. While you have a few more months before you have to make payments on your loans, that time will fly by before you know it. Soon, you’ll get a letter from your loan servicer letting you know when your payments will begin, so it’s wise to start planning ahead for federal student loan payments to resume.