Most federal student loan payments have been on hiatus since March of last year under the CARES Act. This same legislation also ended all efforts to collect delinquent federal student loans and imposed an interest freeze. While this relief was initially scheduled to last six months, former President Trump and President Biden have extended it on several occasions.
The Biden administration has issued another extension until early 2022, and officials have made it clear that this is the last. Borrowers should therefore expect to resume their repayments in just a few months.
Here’s what student loan borrowers need to know.
Student loan payment break ends in January
Biden’s most recent – and final – extension of the moratorium on student loan payments ends on January 31, 2022. That means most borrowers will receive their first bill in February 2022.
As a first step, borrowers should update their contact details with their loan officer, including their phone number, mailing address, and email address, to ensure they receive important correspondence.
What the repayment will look like at the end of the student loan payment break
The Biden administration is in the process of finalizing details on what the repayment will look like for borrowers after the student loan payment break ends. As first reported by POLITICS, the administration is considering several temporary relaxations to facilitate the transition to reimbursement:
- A temporary 90-day grace period during the first months of repayment, during which borrowers will not be penalized for late payments.
- Relaxed requirements for applying or re-certifying income for income-based repayment plans, including the ability for borrowers to apply over the phone with their loan officer to reduce application delays.
- Borrowers who default on their federal loans could be automatically brought back into good standing.
These flexibilities have not yet been finalized, but are under discussion. In the meantime, borrowers should contact their loan officer for more details on their anticipated monthly payments starting in February. Borrowers whose financial situation has deteriorated since the start of 2020 may be able to request a recalculation of their payments as part of an income-based repayment plan.
Your student loan manager may change
Several major loan managers at the Department of Education have announced that they will be leaving the department’s federal student loan system. A change in loan service does not affect a borrower’s federal student loan terms, nor a borrower’s ability to access federal student loan programs. The loan officer is only an entrepreneur for the Department of Education.
Here is the status of the changes in the loan department:
- If your student loans are repaid by Navigate, your loans will be transferred to a company called Maximus, which will operate under the name “Aidvantage”.
- If your loans are repaid by FedLoan Service, your loans will be transferred to a new loan manager in the next few months, but the education department has yet to provide specific details. Some FedLoan accounts are transferred to a company called MOHELA, but the ministry has not clarified whether all FedLoan accounts will be transferred to MOHELA.
- So far, other officials from the Ministry of Education, including Nelnet
Student loan direct debit issues
Many student loan borrowers have used automatic debit programs to pay off their student loans. This can make it easier to manage student loans and can also provide borrowers with modest incentives to lower interest rates. But the payment break and service changes can have uneven impacts for borrowers who have been enrolled in direct debit programs.
According to the Department of Education, “Your direct debit payments may not restart automatically when payments start again. The Department says:
- If you were on direct debit before March 13, 2020, “Your agent will contact you before the end of the suspension to confirm if you wish to remain on direct debit. If you do not respond to these communications, your service agent will stop your direct debit.
- If you signed up for direct debit after March 13, 2020, or if you opted out of the CARES Act payment break, “direct debit payments will resume automatically” and no action is required.
If your student loan manager changes before February, whether or not you need to reinstate direct debit may depend on the specifics of your situation. According to Navient, when your loans are transferred to Aidvantage, “your automatic payment enrollment will automatically switch to Aidvantage, but confirmation may be required if your payments are suspended due to the coronavirus emergency. “
Bottom line: If you were on direct debit, or if you are not at all sure about your obligations or status, contact your loan manager before February.
Will there be a forgiveness for student loans?
In April, President Biden asked Department of Education officials to research and assess whether there is viable legal authority to allow him to unilaterally write off federal student loan debt on a large scale, without Congress. . Student loan borrower advocates and their allies in Congress have urged Biden to use executive action to write off $ 50,000 or more in student loan debt. Biden has expressed support for some form of blanket student loan cancellation, although he did not approve the cancellation of the $ 50,000 debt and expressed uncertainty over his legal authority to act without the Congress.
The White House had originally suggested that a memo outlining the legal review’s findings would be released in the weeks following the April announcement, but so far the administration has not provided any updates or detail. Last week, Congressional Democrats sent a letter to President Biden, urging him to release the note by October 22. But the note was not released on that date. Meanwhile, Education Secretary Miguel Cardona said earlier this week that “conversations continue” about the feasibility of a mass student loan forgiveness.
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