Student loan payments have been suspended until October 2021! President Joe Biden signed an executive order directing the Department of Education to extend the current freeze on payments and interest rates through the end of September 30, 2021.
Student loan forbearance is a primary concern when it comes to pandemic relief because the average borrower owes between $200 and $299 per month. A recent Pew Study found that nearly 60% of borrowers said it would be difficult to restart their payments recently. According to the US Department of Education, about 20% of student loan borrowers are currently in default, which means they are not current on their payments.
In the official White House statement, it says, “Too many Americans are struggling to pay for basic necessities and to provide for their families. They should not be forced to choose between paying their student loans and putting food on the table.”
The CARES Act forbearance has been extended.
The Coronavirus Aid, Relief and Economic Security Act that was passed in March 2020 provided temporary relief for those who owe student loans. This executive order is simply an extension of the payment and interest accrual suspension.
What student loans are suspended during the pandemic?
The interest waiver covers all loans owned by the US Department of Education, including:
- Direct Loans
- Stafford Loans (both subsidized and unsubsidized)
- Graduate Plus loans
- Parent Loans
This does not cover any loans that are not owned by the government. Most Federal Family Education Loans (FFEL) and Perkins Loans are commercially held and not eligible.
How does this affect your student loans?
If you currently owe student loans, there are several things you need to know.
You do not need to make student loan payments.
The government is not making your student loan payments for you. During this time, payments are simply suspended and you don’t need to worry about payments or late fees during this time.
The interest rate is sent to 0% temporarily.
Even during normal forbearance periods, interest continues to accrue. During this suspension period, the interest rate is set to 0% and your loans are not accruing additional interest.
It stops collection on defaulted loans.
Student loans are notoriously difficult to escape. If you are facing collection for defaulted student loans, you will also get relief during this suspension.
Each month of the suspension counts toward loan forgiveness.
If you’re participating in a loan forgiveness program, don’t worry! Each month of the suspension counts as an on-time payment toward your loan forgiveness period. You don’t need to continue making payments in order to meet the requirements of your loan forgiveness term.
This suspension is not loan forgiveness.
Many have expected President Biden to forgive thousands of dollars in student loan debt. If this happens, it will take more time because it will need to go through Congress and it faces opposition. This directive was much faster and provides immediate relief to people struggling through the pandemic.