Biden Extends Student Loan Payment Pause

On Wed., Dec. 22, President Biden extended the moratorium on student loan repayment through May 1, 2022, saying, "We know that millions of student loan borrowers are still coping with the impacts of the pandemic and need some more time before resuming payments." This most recent 90-day extension, which affects 41 million borrowers, continues a measure that began in early 2020 under the Trump administration as part of the CARES Act.

Prior to this move, Biden had pushed an extension set to expire Sept. 30 back to Jan. 31, 2022 "one final time," according to a statement from the White House. Since then, pressure from Democratic lawmakers who want Biden to forgive $10,000 per person in federal student loan debt and concerns about the continuing coronavirus pandemic led to today's announcement.

What Forbearance Means

Under this most recent administrative student loan forbearance, Federal student loan borrowers are not required to make payments during the forbearance period and interest does not accrue. In addition, the more than 7 million borrowers who are in default will not be subject to collections.

The downside is that this relief, even when extended repeatedly, is only temporary. Eventually, the paused payments will become due, and defaulted loans will be subject to collections. The only possible exceptions to those realities would be if Congress or the president were to enact some sort of general student loan forgiveness—or if borrowers were able to qualify for an existing forgiveness program.

Forgiveness Pressure

Although he campaigned on a promise of partial student loan forgiveness, Biden has resisted making good on that promise by executive action, saying he is worried relief would go to people attending elite colleges who do not need the help.

This has not reduced pressure from members of the Democratic caucus and the vice president, who said in a recent interview, “We have so many people, tens of millions of people in the United States, who are dealing with student loan debt and responsibilities, and it’s standing in the way of them being able to start a family or buy a home, and it is real, and we need to deal with it."

Student Loan Forgiveness

Forgiveness or discharge of a student loan is not common, but it is possible. The Federal Student Aid website describes available options for certain types of Federal student loans:

• If you work for a government or not-for-profit organization, you may be able to receive loan forgiveness under the Public Service Loan Forgiveness (PSLF) Program.
• If you teach full-time for five academic years in a low-income elementary school, secondary school, or educational service agency, you may be eligible for forgiveness of up to $17,500 on your Direct Loan or FFEL Program loans.
• If your school closes while you’re enrolled or soon after you withdraw, you may be eligible for discharge of your federal student loan.
• Your Perkins Loan may be canceled (based on your employment or volunteer service) or discharged (under certain conditions).
• If you’re totally and permanently disabled, you may qualify for a discharge of your federal student loans.
• Federal student loans are discharged in the event of the death of the borrower or of the student on whose behalf a PLUS loan was taken out.
• In some cases, you can have your federal student loan discharged after declaring bankruptcy, although this is not automatic.
• If your school committed an illegal act, falsely certified your eligibility for a loan, or failed to return loan funds after you withdrew, you may be eligible for a full or partial discharge of your loan.

Preparing for Repayment

Barring forgiveness or another repayment pause, borrowers in forbearance need to be prepared to begin repayment and deal with defaulted loans before May 1, 2022. In Wednesday's statement, the Presiden said, "As we are taking this action, I’m asking all student loan borrowers to do their part as well: Take full advantage of the Department of Education’s resources to help you prepare for payments to resume, look at options to lower your payments through income-based repayment plans, explore public service loan forgiveness, and make sure you are vaccinated and boosted when eligible."

Federal student loan repayment options include:

• Standard repayment plan. Your payments are a fixed amount that ensures your loans are paid off within 10 years (within 10 to 30 years for Consolidation Loans).
• Graduated repayment plan. Payments are lower at first and then increase, usually every two years, and are for an amount that will ensure your loans are paid off within 10 years (within 10 to 30 years for Consolidation Loans).
• Extended repayment plan. Payments may be fixed or graduated, and will ensure that your loans are paid off within 25 years.
• Revised Pay As You Earn Repayment Plan (REPAYE). Your monthly payments are 10% of your discretionary income, recalculated each year, and based on your annual updated income and family size.
• Pay As You Earn Repayment Plan (PAYE). Monthly payments are 10% of discretionary income, never more than you would have paid under the 10-year Standard Repayment Plan, and recalculated each year based on updated income and family size.
• Income-driven repayment plan. There are four income-driven plans that base your monthly payment on your income and family size. In some cases, your payment may be as low as $0 per month.