Biden extends student loan payment pause: Who's affected and what to know
The Biden administration is extending its federal student loan payment freeze until January 2022. (iStock)
The Biden administration is extending the moratorium on student loan payments – slated to expire in September – until the end of January 2022.
The Department of Education announced Friday what will be the final extension of the coronavirus-related pause in payments, interest and collections. Payments were set to resume in October. The president's administration will soon notify borrowers of the extension and provide information on how to resume their repayment plan when the time comes.
"The payment pause has been a lifeline that allowed millions of Americans to focus on their families, health and finances instead of student loans during the national emergency," Secretary of Education Miguel Cardona said in a statement. "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."
The student loan payment extension will apply to all federal borrowers. Private student loans, however, are not covered by the forbearance period. If you have private student loans, you can lower your monthly payment amount by refinancing into today’s all-time low interest rates. Visit Credible to get started and find your rate.
FEDERAL STUDENT LOAN RATES JUMP NEARLY 1% IN JULY: HOW TO MAKE THE MOST OF YOUR OPTIONS
Democrats pressure for student loan forgiveness
Key Democrats turned up the pressure on the president's administration near the end of July to extend the federal student loan payment freeze, as well as to forgive $50,000 in student debt per borrower via executive order.
"We urge President Biden to act with urgency," Rep. Ayanna Pressley (D-Mass.) said. "Failure to act would be unconscionable, would undermine our economic recovery."
Previously, Democratic lawmakers sent a letter to Biden with the results of their inquiries to student loan servicers, showing that many were concerned about their ability to end student loan forbearance.
While federal borrowers now have more breathing room before payments resume, the extension doesn't apply to those with private loans. If you're struggling to make private student loan payments, visit Credible to find out how to lower your monthly amount and the total you'll pay over the life of the loan by lowering your interest rate.
What to do if you have private student loans
The extended period of forbearance plan only applies to student loan repayment that are backed by the federal government, however, private student loan holders still have options to help in times of financial hardship. They include:
- Refinancing
- Forbearance
- Deferment
Refinancing: Interest rates are at historic lows, meaning many borrowers could save significantly by refinancing their student loans and lowering their interest rates. When refinancing, it can be helpful to view multiple lenders at once to compare options and find the one with the best rate for you.
You can use Credible's free online tool to research different mortgage refinance lenders and see what your loan options are.
Forbearance: In times of financial hardship, some lenders will allow student loan borrowers to pause their monthly payments. However, unlike the current federal student loan forbearance, forbearance for private loans will continue to accrue interest on the overall loan amount.
BIDEN ADMINISTRATION CANCELS $500M OF STUDENT LOAN DEBT: THIS IS WHO QUALIFIES
Deferment: Another option for those going through financial hardship is deferment. This option is similar to forbearance – but it also pauses interest accrual. Because there isn't mandatory forbearance for private lenders, not all will offer these options, and proof of hardship is often required. Contact your student loan servicer to discuss what options are available to you.
Have a finance-related question, but don't know who to ask? Email The Credible Money Expert at moneyexpert@credible.com and your question might be answered by Credible in our Money Expert column.