Biden unlikely to extend student loan hiatus – how borrowers can prepare

As of March 27, 2020, payments on federal student loans have been suspended and the interest rate on federal student loans has been set at 0%. This moratorium on student loans is currently set to expire on January 31, 2022, and payments are expected to resume on February 1.

Recently, politicians such as Senate Majority Leader Chuck Schumer and Senator Elizabeth Warren as well as hundreds of organizations such as the American Civil Liberties Union, American Federation of Teachers, NAACP and Student Borrower Protection Center have asked President Biden to extend the break. – arguing that the borrowers are service agents are not prepared for the resumption of loan repayments.

On December 11, White House press secretary Jen Psaki said payments would resume as scheduled on February 1.

“The Ministry of Education is already communicating with borrowers to help them prepare for the return to repayment on February 1,” said Psaki at a press conference. “41 million borrowers have benefited from the extended student loan repayment break, but it expires on February 1.

She also said the Biden administration “will engage directly with federal student loan borrowers to ensure they have the resources they need and are on the proper repayment plan” and that they are still “evaluating the impact of the Omicron variant”.

Ultimately, “a smooth transition to reimbursement is a high priority for the administration,” Psaki stressed.

How to prepare

A recent poll of 33,703 student loan borrowers by the Student Debt Crisis Center found that even among student loan borrowers with full-time jobs, 89% say they are not financially secure enough to start making payments after February 1. And 21% say they will never be financially secure enough to resume payments.

Ashley Boucher, director of corporate communications for Sallie Mae, previously told CNBC Make It that “forecasting the future” will be key for borrowers as the hiatus deadline approaches.

“Understand how your finances may have changed as a result of the pandemic,” she says. “Are you changing your life scenario? Has your job changed? Has your income changed? What is your new budget? “

While every borrower’s situation varies, Boucher points out that the biggest thing a borrower can do right now is check their balance so they have all the information they need to make the right decision for them. .

“The key, regardless of when you re-make payments, is knowing who you owe, how much you owe,” she says. “And know how everything is going to fit into this new budget that you can have for yourself.”

Scott Buchanan, executive director of the Student Loan Servicing Alliance, previously told CNBC that a little thing borrowers can do to make sure they’re ready to resume payments is to check if their lender has any credentials. contact up to date since many borrowers have moved during the pandemic.

“You can confirm that we have the correct information just by logging into your online account,” he says. “This way you will receive all relevant information directly from your service agent on when you will resume the refund.”

Additionally, more than 10 million student loan borrowers will see their service change by the end of 2021. The service is expected to notify borrowers if their loans have been transferred, but some borrowers are missing this notification. Borrowers can check the Federal Student Aid Dashboard before the break is over to make sure they aren’t missing payments or sending payments to the wrong place.

And if borrowers want debt relief through the civil service loan forgiveness program, they must enroll in an income-based repayment plan before payments resume.

It should be noted that the Department of Education offers a limited waiver of the PSLF so that borrowers can count their previous payments, “regardless of loan type or repayment plan.” Borrowers have until October 31, 2022 to complete this temporary waiver.

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