Yesterday, President Biden announced that he would extend an ongoing student loan payment moratorium on federally administered loans well into 2023. The pause, which has been in effect since March 2020 and was set to expire next month, also set interest rates at zero on federal student loans held by the government, and suspended all collection efforts against borrowers in default. Gave.
Here’s what borrowers need to know about the latest extension.
Legal battle over Biden’s one-time student loan forgiveness plan has led to student loan freeze being extended again
Biden decided to extend the moratorium again after federal courts blocked his one-time student loan cancellation initiative, which would have canceled $10,000 or more in federal student loan debt for millions of borrowers.
The administration is appealing to the US Supreme Court, which may have the final say on the program’s legality. Today, a coalition of progressive organizations, labor unions, and borrower advocacy groups filed an amicus brief along with the nation’s highest court, urged the court to rule in the administration’s favor and allow the student loan forgiveness program to move forward.
Persis Yu, deputy executive director and managing consultant at Student, said, “As this country works to recover from the COVID-19 pandemic, working and middle-class Americans need to deliver on their promise of student loan relief for President are counting on.” Borrower Protection Center, in a statement. “Collective AMCs are on the front lines, helping borrowers afloat from the broken student loan system and the double whammy of the COVID-19 pandemic. Resuming repayment without cancellation would expose millions of borrowers to default and deprive them of much of their wages, Social Security benefits and the earned income tax credit. These debtors are better off than being treated like political pawns. We are confident that the Supreme Court will see through the political machinations and allow this critical program to provide the relief that 40 million working and middle class borrowers desperately need.
The exact duration of the student loan pause extension has not been determined
Unlike previous extensions of student loan pauses, Biden’s latest extension doesn’t have a definitive end date. According to a statement from the Department of Education, “payments will resume 60 days after the Department is granted permission to implement the program or the litigation is resolved.” This means that theoretically, payments could resume within a few months if the Supreme Court delivers a final verdict on the matter soon.
But a final decision may not come until sometime this summer, and the Department of Education indicates the extension of the payment freeze could continue through June 30, 2023. Even then, borrowers don’t actually have to start making payments until 60 days. Later 30 June. This effectively means that borrowers may have time till the end of August 2023.
Of course, as borrowers have already seen, these conditions can change quickly. It is possible that the payment freeze could end soon, or potentially it could be extended again, even after the summer of 2023.
Student loan deferment benefits will continue
Despite some uncertainty about how long the student loan moratorium will actually last, the benefits of the payment moratorium will continue beyond December 31. Will be suspended.
In addition, months of suspended payments will still be eligible for student loan forgiveness under Income-Driven Repayment (IDR) plans and the Public Service Loan Forgiveness (PSLF) program.
Extending student loan moratorium could help PSLF borrowers
Because the payment pause will continue to count toward PSLF (provided a borrower is working in eligible employment and complies with other PSLF program criteria), the extension beyond December 31 will apply to many borrowers seeking student loan forgiveness under that program. Might be helpful.
The Department of Education indicated last week that many PSLF applications submitted in the weeks before the October 31 limited PSLF exemption deadline were still being processed. In addition, the new IDR Account Adjustment Initiative – a separate but related program – is currently being rolled out and is not set to be fully implemented until July 2023. The IDR account adjustment effectively extends many of the benefits of the limited PSLF waiver, providing a second chance for relief to many borrowers under temporary flexibility.
Student loan break extension coincides with loan forgiveness regulatory reforms
The extended student loan moratorium through the summer of 2023 will coincide with a comprehensive regulatory overhaul of major federal student loan forgiveness programs. In addition to the temporary IDR account adjustment initiative, the updated rules will streamline and improve other federal student loan forgiveness and relief programs on a more permanent basis. This would include Public Service Loan Forgiveness (PSLF), security for loan repayment, and total and permanent disability (TPD) discharge programs.
The Department of Education will also roll out a new, potentially more affordable Income-Driven Repayment (IDR) plan, and eliminate several events that trigger student loan interest capitalization.
The initiative is expected to be in place by July 1, 2023.
Further Reading Student Loan Forgiveness
Did you get the student loan forgiveness email? Education department has sent massive notices to borrowers
Education Department Says $24 Billion In Student Loan Forgiveness Approved Under Waiver, More To Come
Court approves $6 billion in student loan forgiveness for 200,000 borrowers to settle lawsuit
Student loan forgiveness status: 6 updates after block relief from multiple courts
Credit: www.forbes.com /