On August 6, 2021, the U.S. Department of Education announced an extension of the pause on federal student loan payments to January 31, 2022. The payment moratorium, currently in effect for millions of federal student loan borrowers, was set to end on September 30, 2021.
The Department noted that this extension would be the last one. U.S. Secretary of Education Miguel Cardona stated: “As our nation’s economy continues to recover from a deep hole, this final extension will give students and borrowers the time they need to plan for restart and ensure a smooth pathway back to repayment.”1
How many payment pauses have there been?
There have been four pauses to federal student loan repayment since the start of the coronavirus pandemic. The first pause was instituted in March 2020 for six months (through September 2020) when Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The second and third pauses came via presidential executive order and extended the payment pause through January 2021 and through September 2021, respectively. The fourth and “final” extension is now scheduled through January 31, 2022. This means federal student loan payments will resume beginning February 1, 2022.
The Department of Education will begin notifying borrowers about this final extension in the coming days, and it will release resources and information about how to plan for repayment as the end of the pause approaches.
Does interest continue to accrue during the moratorium period?
No, interest does not accrue during the moratorium period. Essentially, the interest rate is set at 0%.
Can borrowers make payments if they want to during this time?
Yes. Borrowers can choose to keep making their monthly student loan payments during the moratorium period if they wish. The full amount of a borrower’s payment will be applied to principal. Borrowers can also choose to make partial payments during this time.
Do private student loans qualify for the payment pause?
No, private student loans aren’t eligible. Only student loans held by the federal government are eligible. This includes Federal Direct Loans (which includes PLUS Loans), along with Federal Perkins Loans and Federal Family Education Loan (FFEL) Program loans held by the Department of Education.
Is student loan forgiveness likely when the payment pause ends?
Probably not. While some legislators have gone on record in favor of forgiving a certain amount of federal student loan debt per borrower, the Biden administration has not taken any steps in this direction and has given no indication that it will do so. Borrowers should be ready to start repaying their loans when the pause ends on January 31, 2022. In the case of continued financial hardship at that time, borrowers should contact their loan servicer to inquire about requesting an individual deferment or forbearance.
For more information, visit the Federal Student Aid website.
If you have questions or need assistance, contact the Experts at Henssler Financial:
- Experts Request Form
- Email: experts@henssler.com
- Phone: 770-429-9166
1) Department of Education, 2021
Disclosures: The following information is reprinted with permission from Forefield, a division of Broadridge Financial Solutions, Inc. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
