COVID-Driven Student Loan Forbearance to End in January 2022

Federal student loan forbearance, which the Biden administration extended through 2021, will come to an end on Jan. 31, 2022. This article explains what that means for student borrowers and also looks at some of the president's other college-related initiatives.

How Student Loan Forbearance Has Worked

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act), passed by Congress in March 2020 provided for a suspension of loan payments on Education Department-held federal student loans through Sept. 30, 2020. (That applies to most federal student loans, with the exception of certain FFEL Program and HEAL loans that are held by commercial lenders and some Perkins Loans that are held by the colleges and universities themselves.)

The suspension was subsequently extended by the Trump administration to Dec. 31, 2020, and then to Jan. 31, 2021. In August 2021, President Biden's Department of Education extended it one last time, to Jan. 31, 2022.

While it remains in effect, the forbearance program provides for:

• The suspension of loan payments
• A 0% interest rate on outstanding debt
• A suspension of collections on defaulted loans

What the End of Student Loan Forbearance Will Mean

If you have outstanding federal student debt that has been in forbearance, the Department of Education says that, "Both Federal Student Aid and your servicer will contact you ahead of time to remind you when you need to start making payments again."

To facilitate that process, the department adds that borrowers should: "Make sure your contact information is up to date in your profile on your loan servicer's website and in your StudentAid.gov profile."

You should receive a billing statement or other notice at least 21 days before your first payment is due.

Biden's Other Student Debt Proposals

The extension of student loan forbearance was the first, but it is unlikely to be the last, initiative by the Biden administration to address the cost of higher education and the availability of financial aid to help pay for it. When he was running for president, Biden's campaign website listed 10 major initiatives that he hoped to implement, Congress willing.

1. "Make public colleges and universities tuition-free for all families with incomes below $125,000." Biden credits this proposal to Sen. Bernie Sanders, who, with Rep. Pramila Jayapal, introduced the College for All Act in 2017. Biden’s plan would also make up to two years of community college tuition-free, apparently regardless of income.

As of October 2021, the proposed Build Back Better Act—which has yet to come up for a vote in Congress—includes such a provision for community colleges, although its fate is uncertain.

2. "Target additional financial support to low-income and middle-class individuals." Biden proposed to double the maximum value of Pell Grants and significantly increase the number of Americans who qualify for them. Unlike student loans, Pell Grants never need to be repaid, except in rare instances. The current maximum Pell Grant is $6,495 per school year. Biden's plan would also make Dreamers eligible for financial aid, if they meet other requirements for that aid, and restore financial aid eligibility to people who were formerly incarcerated. 

In this case, the Build Back Better Act would increase the maximum Pell Grant by close to $1,500. Additionally, the White House says it would "invest billions in subsidized tuition for low- and middle-income students at Historically Black Colleges and Universities, Tribal Colleges and Universities, and minority-serving institutions."

3. "More than halve payments on undergraduate federal student loans by simplifying and increasing the generosity of today’s income-based repayment program." Borrowers who make $25,000 or less a year wouldn't have to make payments on their undergraduate federal student loans, and those loans wouldn't accrue interest. Others would pay 5% of their discretionary income over $25,000 toward their loans. After 20 years of regular payments, the remaining balance on the loan would be forgiven. Biden's proposal would also change the tax code to make debt that's forgiven through an income-based repayment plan nontaxable.

4. "Make loan forgiveness work for public servants." Biden proposed to revamp the Public Service Loan Forgiveness Program (PSLF), launched in 2007, which has failed to deliver relief for many applicants. He would also create a new program to provide $10,000 of undergraduate or graduate student debt relief for every year of national or community service the applicant performs, for up to five years.

In October 2021, the Department of Education announced that it was in the process of overhauling the Public Service Loan Forgiveness Program. Its plans include offering a "time-limited waiver so that student borrowers can count payments from all federal loan programs or repayment plans toward forgiveness." That would include certain types of loans and payment plans that previously weren't eligible for PSLF and open the program to many more borrowers.

5. "Create a 'Title I for postsecondary education' to help students at under-resourced four-year schools complete their degrees." This initiative would provide federal grant money to help support schools that serve a large population of Pell Grant–eligible students. 

6. "Create seamless pathways between high school, job training, community college, and four-year programs to help students get their degrees and credentials faster." Biden's plan would provide money to states for programs that, for example, better align high school, community college, and four-year college courses or provide college credits for on-the-job training and internships.

7. "Prioritize the use of work-study funds for job-related and public service roles." The Biden plan would refocus federal work-study programs so that students would develop career-related skills or perform a public service by mentoring K–12 students.

8. "Stop for-profit education programs from profiteering off of students." This initiative would, for example, require for-profit schools to "prove their value to the U.S. Department of Education" before they’d be eligible for federal aid. Biden would also restore the former borrower defense to repayment rules, which made it possible for students who were deceived by for-profit colleges to have their loan debt forgiven.

The Biden administration has made some moves in this direction, including discharging $1.1 billion in loan debt for 115,000 students who attended the now-defunct ITT Technical Institute. In addition, the Federal Trade Commission in October 2021 sent a notice to 70 of the largest for-profit colleges and vocational schools that it would be "cracking down on any false promises they make about their graduates' job and earnings prospects and other outcomes and will hit violators with significant financial penalties."

9. "Crack down on private lenders profiteering off of students and allow individuals holding private loans to discharge them in bankruptcy." At present, private student loan debt is one of the few types of debt that generally cannot be discharged in bankruptcy. This Biden proposal would make including student debt in bankruptcy easier.

10. "Support and protect post-9/11 GI benefits for veterans and qualified family members." Biden's plan would tighten rules to protect veterans and their family members from predatory lenders and schools.

Biden's Other Higher Education Proposals

President Biden's other proposals for higher education focus primarily on two areas: (1) community colleges and workforce training programs and (2) minority-serving institutions (MSIs). Some specifics: 

Community college and workforce training programs

As mentioned, Biden's proposals would pay for up to two years of tuition at community colleges. They would also make funds available to cover the cost of training programs that "have a track record of participants completing their programs and securing good jobs." In addition to recent high school graduates, these programs would be open to older adults who didn't go beyond high school or need to learn new skills.

The plan would make $50 billion available for workforce training programs, which it broadly defines as "partnerships between community colleges, businesses, unions, state, local, and tribal governments, universities, and high schools to identify in-demand knowledge and skills in a community and develop or modernize training programs." The goal of those programs would be to provide students with "a relevant, high-demand industry-recognized credential."

The Biden plan would also invest $8 billion in community colleges to improve their facilities and upgrade their technology.

Since candidate Biden made these proposals, his administration has written similar initiatives into its proposed infrastructure bill, the American Rescue Plan, which also awaits action in Congress. It would, for example, invest $48 billion in workforce development and worker protection, including the creation of 1 million to 2 million new apprenticeships.

Minority-serving institutions (MSIs)

Candidate Biden's proposals would provide $18 billion in grants to minority-serving institutions (MSIs), including historically Black colleges and universities (HBCUs), tribal colleges and universities (TCUs), Hispanic-serving institutions (HSIs), and Asian American– and Native American Pacific Islander–serving institutions (AANAPISIs).

Again, the Build Back Better Act, if passed as currently proposed, would "invest billions" in these institutions, according to the White House.

Biden's earlier proposals would also provide additional funds to private, nonprofit MSIs, so that they are not at a competitive disadvantage with four-year public colleges and universities if and when those become tuition-free for many families under another Biden initiative (see No. 1 above).

 On top of that, the plan would make further investments in MSIs, including:

• $10 billion to create at least 200 new "centers of excellence" to "serve as research incubators and connect students underrepresented in fields critical to our nation's future"
• $20 billion to upgrade and modernize their research and lab facilities
• $10 billion to fund programs to increase the enrollment, retention, completion, and employment rates of MSI students

To date during the Biden administration, MSIs have received several billion dollars in additional funding. For example, the American Rescue Plan, signed into law in March 2021, and other pandemic relief funds provided nearly $3.7 billion to HBCUs. The following month, the Department of Education discharged about $1.6 billion in debt owed by 45 HBCUs.