The U.S. Department of Education recently announced the pause on federal student loan payments has been extended to August 31, with plans being made to grant Individuals with federal student loans a “fresh start” on repayment. Borrowers can now have delinquencies and defaults eliminated, allowing them to reenter repayment in good standing when student loan payments resume.
Student loan payments were set to resume in May before the new extension, the sixth of its kind since the start of the pandemic in March 2020. Loan relief will continue to be provided, including to those who have been defrauded by institutions and those who are eligible for the Public Service Loan Forgiveness program, the Department of Education said in a release.
“This additional extension will allow borrowers to gain more financial security as the economy continues to improve and as the nation continues to recover from the COVID-19 pandemic,” U.S. Secretary of Education Miguel Cardona said in the release. “It remains a top priority for the Biden-Harris Administration to support students, families, and borrowers — especially those disproportionately impacted by the pandemic. During the pause, we will continue our preparations to give borrowers a fresh start and to ensure that all borrowers have access to repayment plans that meet their financial situations and needs.”
Here are some helpful takeaways from this recent news:
- Upon the completion of the pause, borrowers with covered loans shouldn’t experience the following – wage garnishment, seizure of their tax refunds, seizure of money from their Social Security benefits, or collection calls.
- Enrollment in an income-driven repayment plan (IPR) should be available to borrowers, which would allow them to receive a more affordable monthly student loan bill and earn credit toward cancellation of debt remaining after 20 to 25 years in repayment.
- The record of default should be eliminated from borrowers’ credit history.
- Borrowers who were ineligible for further student aid due to their default should become eligible, allowing them another chance at higher education.
Borrowers can be proactive in light of this development:
- Those with privately held FFEL and Perkins loans could consider consolidating into the Direct Loan program to gain eligibility for the payment suspension and interest pause and other benefits afforded to direct loan borrowers, such as lower IDR payments under the revised Pay As You Earn (PAYE) plan.
- Those who are not in an income-driven repayment (IDR) plan could look into switching to an IDR plan to allow suspension time to count toward eventual IDR loan forgiveness. Or, borrowers can make voluntary student loan payments now – even though payments aren’t required.
Sader Law Firm is ready to assist anyone in need of representation regarding outstanding student loan debt. Contact us at (816) 561-1818 with any questions.