Student Loan Interest Freeze

Federal student loan payments are expected to resume May, two years after being halted due to the coronavirus pandemic.

Student Loan Interest Freeze

Federal student loan payments are expected to resume May, two years after being halted due to the coronavirus pandemic. The Education Department sent unusual guidance to companies managing its $1.6 trillion student loan portfolio. This cast doubt on the timing.

The guidance advised not to reach out to borrowers regarding the May 1 deadline.

The email was obtained by NPR. It was first reported by Politico. It did not explain why servicers should keep quiet about the deadline. Nor did it state that the deadline would be extended. The order does suggest that the Biden administration may be considering extending the student loan payment freeze.

The law requires that the department contact borrowers at least six times prior to the return to repayment. This means that the administration cannot delay the decision for as long as it takes.

This email follows just days after White House Chief Of Staff Ron Klain suggested that the repayment pause could possibly be extended in an appearance on podcast Save America.

Klain stated that the president would look at student debt before the pause expires or extend the pause.

The left is urging students to pay off their student debt

Klain's words, "What we should do about student debt," are a direct reference to the elephant in room for Biden. He promised as a presidential candidate to cancel at least $10,000 of student debt per borrower but his resistance to doing so has disappointed many in his party.

Biden is now under increasing pressure from his left flank. Rep. AyannaPressley, D.Mass., tweeted, "Student Debt Cancellation Is a Racial & Economic Justice Issue" and "@POTUS must #CancelStudentDebt" -- a tweet Sen. Elizabeth Warren (D-Mass.) shared. She added, "Grateful that you are fighting by your side."

Biden has been made uncomfortable by Chuck Schumer, the Senate Majority Leader. Schumer tweeted after Klain's comments were made public: "Today would have been a great day to President Biden, Vice President Harris to #CancelStudentDebt."

The pressure from other Democrats led to Biden's December decision to extend the repayment suspension from Jan. 31 through May 1, despite the fact that the Education Department had begun to send notices to borrowers.

The department sent borrowers nearly 385,000,000 emails over the last two years to alert them to approaching deadlines. But those deadlines were wiped out half a dozen more times when the Trump administration, then the Biden administration, announced an extension. This created confusion for borrowers.

This email is being sent to loan-servicing firms in an attempt to stop another flood of confusing notices to borrowers around another deadline that could disappear.

Resuming repayments in May is not without risk

It is a risky decision to require tens to millions of borrowers in May to repay their loans.

Logistically, Navient and FedLoan are closing down federal contracts. This leaves the Education Department with millions of borrowers to be served by other servicers. This could make it more difficult for some to obtain the help they need to change their repayment plans or pay monthly -- not the frustration Democrats want to see linger into the election season.

This is the main problem with May. Anyone with a calendar can see that it is dangerously close the November midterm elections. Democrats have little to gain by asking borrowers to repay student loans before the elections.

Liberal Democrats who had been advocating for debt cancellation could see a return of repayment as Biden abandoning the campaign promise. It makes no sense to force borrowers (and the government) back into debt repayment or collection if cancellation has already occurred. Biden could extend the deadline to cancel the decision, but that would be a political asset for Democrats.

Klain stated on the podcast that Joe Biden was the only president to have not paid off his student loans throughout his presidency. This is clearly a test-driving point for borrower voters.

Some of the advocates for borrowers who pushed Biden to cancel are now supporting a second extension of the repayment pause.

Mike Pierce, executive director at the Student Borrower Protection Center said in a statement to NPR that "this is one of those rare cases when economics, politics and policy all push in the same way."

Student loans are not the only thing that is becoming more costly in America due to the pandemic. Pierce responded to the department's email to student loan servicers.

Conservative critics of Biden argue that enough is enough

The CARES Act paused student loan interest and payments in March 2020. Borrowers were still in the grip of the pandemic. Bipartisan support was received for both the pause and moves to extend it.

Hiring is on the rebound despite inflation reaching a new 40-year high. Critics of another extension point out that the pause in interest and payments has cost taxpayers as well as the federal government at least $95 trillion .

The rumored extension "makes it clear that the President is content using the narrative about a permanent pandemic [his] policy preferences behind closed door doors," Rep. Virginia Foxx, North Carolina stated in a statement to NPR. She is the House Education Committee's top Republican.

"Hardworking taxpayers get tired of being treated unfairly by the President. Foxx stated that another repayment freeze will only lead to unfairness, which is unavoidable for both taxpayers as well as responsible borrowers.

NPR was informed that an Education Department spokesperson did not confirm that the repayment suspension would be extended beyond May 1. However, he stated, "From Day One, Biden-Harris Administration has committed to providing meaningful relief for student loan borrowers, including the 41,000,000 borrowers who have benefited from the extended student loan payment suspension. The Department will keep in touch with borrowers regarding federal student loan repayments by providing timely updates and clear communication.

Borrowers who want to know when they can resume repaying student loans will need to wait.

The Student Loan Payment Pause is Extended to Aug. 31, 2022

The U.S. Department of Education (ED), extended the student loan payment pause until Aug. 31, 2022 on April 6, 2022.

These are the relief measures that are available for -eligible loans:

  • A suspension of loan payments
  • A 0% interest rate
  • Stop collection of defaulted loans

Prepare for Repayment of Resume

These are the four steps you can take to ensure that your student loan payments will be covered on your resume.

  • Your loan servicer profile and your profile should be updated with your current contact information.
  • Check your auto-debit enrollment and sign up for the first. Log in to the website of your loan servicer or contact them directly.
  • To find the right repayment plan for you, check out Loan Simulator or decide whether you want to consolidate.
  • You might consider applying for an Income-Driven Repayment (IDR) plan. Depending on your income and family size, an IDR plan may make your payments less expensive.

Payment amount and due date

Are you curious about your due date and payment amount? After the payment pause is over, you will receive your billing statement or any other notice at least 21 calendar days before your due date. This notice will contain your payment amount as well as the due date.

You can also get an estimate of your due date and payment amount through your loan provider. You can contact your loan servicer online, or by telephone.

Frequently Asked Questions (FAQs).

When payments stop, will auto-debit payments resume?

Most borrowers will need to opt in before auto-debit payments start automatically. To confirm auto-debit enrollment, most borrowers will have to opt in.To see your auto-debit status, look at the table below.

Status Result
On auto-debit before March 13, 2020 Before the payment pause ends, your servicer will reach out to you to confirm that you wish to continue with auto-debit. Your servicer will cancel your automatic debit if you don't respond to these messages.
Auto-debit signed up after March 13, 2020 When payments start again, your auto-debit payments will automatically begin.
You have opted out of the payment freeze and signed up for auto debit Auto-debit will continue to work as usual. To keep your auto-debit in effect, you don't need to do anything.
In default of loan(s). You may have different auto-debit options. To discuss your auto debit options, contact ED's Default Resolution Group
Perkins Loans Your servicer (ECSI), is cancelling auto-debit enrollments on January 5, 2022. To get auto-debit back, you will need to signup after Jan. 5, 2022.

If you have any questions regarding your auto-debit, or need to change your bank information on file, contact your loan servicer.

How can I determine what my interest rate will look like after the 0% rate expires?

Many borrowers will see their interest rates remain the same as before the 0% rate was introduced.

Some borrowers may find that their interest rates have changed. If you consolidate your loans during the payment suspension, your interest rate may have changed.

For the exact interest rate, contact your loan servicer. This information may also be available on the site of your loan servicer.

What happens to my payment amount after the payment pause?

It depends. It all depends. The following information would be used by your loan servicer to calculate your new payment amount:

  1. Your current balance of principal & interest
  2. your remaining repayment period.

Your payment amount for an IDR plan will be restored to the same level as before you were paused, unless you have recertified or changed plans since the payment suspension began.

Is it possible for me to delay paying my loans because of the payment pause?

It all depends on whether you are on an IDR or traditional repayment plan. Standard, Graduated and Extended Repayment Plans are all traditional repayment plans. IDR plans include Revised Payment As You Earn Repayment, Pay As You Earn Repayment and Pay As You Repay (PAYE); Income Based Repayment (IBR); as well as Income-Contingent Repayments (ICR).

Traditional Repayment Plan (Standard or Graduated)
Your repayments will be paused when the payment pause is lifted. The same number of monthly payments will be made. However, the date you were supposed to repay has been postponed.

Let's say, for example, that you enter repayment on a 10-year Standard Repayment Plan January 1, 2018. Your loan would be repaid in 10 years. You would normally pay off your loan by December 31, 2028. The 10-year repayment period does not include the payment pause. If the payment pause lasted for more than two years, you must repay the loan fully by December 31, 2030.

Income-Driven Payment Plans (REPAYE/PAYE and IBR)
Because the suspended payments count towards your forgiveness, the payment pause has not impeded your progress toward IDR forgiveness.

These examples are only general and may not be applicable to your particular situation. If you have any questions, or require assistance, please contact your loan servicer.

My monthly student loan payment is too high and I cannot afford it. How can I lower it?

Enrolling in an income driven repayment (IDR), plan may help lower your monthly student loan payments. An IDR plan will allow you to set your income and family size as the basis of your monthly student loan payments. Fill out an IDR plan to get the lowest monthly payment.

Your loan servicer can help you if you aren't eligible for an IDR program. To help you understand your options, your loan servicer will work with you.

Is there any option for loan forgiveness that is coronavirus-related?

There is no coronavirus-related loan forgiveness available for federal student loans. Your loan servicer and the Department of Education should be your trusted sources of official loan forgiveness information.

Federal student aid is free. You don't have to pay anything. For any questions regarding loan payments or to apply for loan forgiveness, contact your loan agent.

Learn about to avoid student aid scams.

Why didn't I get a 1089 E form for the 2021 tax years?

The COVID-19 payment suspension may have affected your IRS Form 1098E.

If you have paid $600 or more in interest on student loans during the tax year, your loan servicer will send you a 1098 E. However, if you had your payments halted in 2021 you will likely have paid less interest than normal.

You may not be eligible for a 1098 E if you have paid less than $600 student loan interest in the tax year. Want to find out the exact amount of student loans interest you paid? For that information, you can contact your servicer.

Learn more about reporting student loans interest payments on taxes using IRS form 1098-E.