Borrowers with eligible federal loans have not been required to make student loan payments on their loans since the start of the Covid-19 pandemic. Interest has also not been charged on these loans.
But, this payment pause and interest waiver will eventually end. When will the suspension of student loan payments end? What options will be available to borrowers who are still unable to repay their student loans?
History of the Student Loan Payment Pause and Interest Waiver
Senator Chuck Schumer sent a letter to President Trump on March 11, 2020, urging the President to declare a national emergency under the Robert T. Stafford Disaster Relief and Emergency Assistance Act and to provide a six-month forbearance for federal student loans.
The President responded by declaring a national emergency on March 13, 2020. He also said that he would suspend repayment and waive the interest on all student loans held by federal government agencies for at least 60 days. On March 20, 2020, Secretary DeVos issued a press release announcing implementation of this policy.
After President Trump announced the payment pause and interest waiver on March 13, 2020, Congress enacted a six-month payment pause and interest waiver as part of the CARES Act on March 27, 2020. The payment pause and interest waiver was set to expire on September 30, 2020.
On August 8, 2020, President Trump signed a memorandum ordering Secretary DeVos to extend the payment pause and interest waiver through December 31, 2020. Secretary DeVos implemented the extension on August 21, 2020.
On December 4, 2020, Secretary DeVos announced an extension the payment pause and interest waiver through January 31, 2021.
On January 20, 2021, his first day as president, President Biden further extended the payment pause and interest waiver through September 30, 2021.
Could the Payment Pause and Interest Waiver Be Extended Further?
The payment pause and interest waiver could be extended further, so long as the national disaster declaration remains in effect. The waiver authority under the Heroes Act of 2003 (P.L. 108-76, 20 USC 1098bb) allows the U.S. Secretary of Education to waive or modify rules relating to Title IV federal student aid in connection with a national emergency to ensure that financial aid recipients are no worse off financially due to the national emergency.
A further extension is unlikely, however, due to progress in vaccinating Americans. All student loan borrowers are now eligible for vaccination. There might be a further extension to the payment pause and interest waiver, if the economic recovery is sluggish, but it is unlikely to be extended beyond the end of the year.
How to Prepare for the Restart of Repayment
Two months before the restart of repayments, loan servicers will notify borrowers of their new payment date. The CARES Act requires loan servicers to provide at least a half dozen notices to borrowers about the restart of repayment.
Borrowers who participated in autopay, where monthly loan payments were automatically transferred from the borrower’s bank account to the loan servicer, may have to confirm that their bank account information is still valid.
Borrowers should make sure that the loan servicer has their current contact information. This is especially important if the borrower has moved during the pandemic.
Borrowers may experience difficulty contacting their loan servicer when the payment pause and interest waiver ends, as call centers may be swamped. It is best to try contacting the loan servicer through the loan servicer’s web site, most of which provide a secure email service. Also look for announcements and self-service options on the loan servicer’s web site.
Borrowers should be prepared to send in the payment even if they do not receive a loan statement, but should confirm that the payment address has not changed. The payment address should be available on the lender’s web site. If paying by check, write the loan ID numbers on the check.
What Can You Do If You Can’t Afford to Make Student Loan Payments?
There may be an increase in delinquency at the restart of repayment, since transition periods can be confusing. Some borrowers may still be unemployed or struggling to pay their bills.
If you still need help making student loan payments, contact the loan servicer to ask about your options.
Most lenders have a page that reviews options for borrowers who are experiencing financial distress. It is best to read this page before calling or emailing the lender.
If you are having difficulty repaying your federal student loans, there are several deferment and forbearance options available, including the economic hardship deferment, unemployment deferment and general forbearances. Deferments and forbearances suspend the repayment obligation. Interest may continue to accrue, depending on the type of loan.
Another option is an income-driven repayment plan, which bases the monthly payment on the borrower’s income. The income-based repayment (IBR), pay-as-you-earn repayment (PAYE) and revised pay-as-you-earn repayment (REPAYE) plans have a zero monthly payment if your income is less than 150% of the poverty line. The income-contingent repayment plan (ICR) has a zero monthly payment if your income is less than 100% of the poverty line. If your income has changed, ask the loan servicer to recertify your income early.
You may be able to reduce your monthly payment or change your loan repayment term by refinancing. However, keep in mind that when you refinance a federal student loan to a private student loan you lose federal benefits such as student loan forgiveness and repayment options.