Biden Administration Extends Covid-19 Student Loan Forbearance
The Biden administration announced on Wednesday another extension of the Covid-19 federal student loan forbearance program. The pause on payments and interest accrual, which had originally been scheduled to end on Jan. 31, will now be extended through May 1, 2022.
“We know that millions of student loan borrowers are still coping with the impacts of the pandemic and need some more time before resuming payments,” President Biden said in a statement.
The payment pause originally began in March 2020, when federal student loan payments were paused and interest rates were set to 0%. Collections for defaulted loans are also paused and those enrolled in Public Service Loan Forgiveness (PSLF) are able to count the time in forbearance toward their eligible payments.
The most recent extension is the latest in a series of updates to the Covid-19 loan forbearance. Both the Trump and Biden administrations extended the program multiple times. In August, President Biden announced that he was extending the student loan relief one final time until the end of January. As late as last week, the administration hadn’t decided whether it would extend the program.
The threat of student loan repayments restarting so soon drew widespread criticism, as the omicron variant looms and many are struggling with inflation that’s at a 30-year high.
“This simultaneous restart of 32 million borrowers’ loans, half of whom will also be transferring to a new loan servicer, marks an unprecedented event with a heightened risk of borrower harm,” wrote Sens. Elizabeth Warren (D-MA), Chris Van Hollen (D-MD), Richard Blumenthal (D-CT) and Tina Smith (D-MN) in a Dec. 2 letter to the heads of student loan servicers.
Some Democrats also questioned the wisdom of restarting student loan payments with the midterms approaching—particularly after Sen. Joe Manchin (D-WV) announced that he would not support the president’s Build Back Better bill, potentially dooming the landmark legislation.
While the moratorium on federal student loan payments will continue for an additional 90 days, payments are likely to resume sometime in 2022. It’s not too early to start preparing. Check in with your student loan servicer and make sure it has your current contact information. If your loan servicer has changed in the last year—a prospect that more 15 million borrowers are facing—take the appropriate steps to ensure a smooth transition.
When payments do restart, check your servicer’s policy to see if auto payments will automatically resume. Lastly, verify your payment amount and make sure it’s still within your budget. If not, consider ways to reduce it, such as income-driven repayment plans.