Know When Do Student Loan Payments Resume?

In March 2020, The United States Congress passed, and President Donald Trump signed into law, the CARES (Coronavirus Aid Relief and Economic Security) Act. The $2.2 trillion economic stimulus bill was a response to the economic fallout of the Covid crisis.

In addition to providing billions of dollars in one-time cash payments to individuals who submitted tax returns, increasing unemployment benefits, the forgivable small business loans via the Paycheck Protection Program (PPP), corporate loans, and funds for state and local governments, the CARES Act also provided some relief for student loan borrowers.

When Do Student Loan Payments Resume

Biden has prolonged the suspension on student loan payments and interest until January 1, 2023, and stated that this would be the final extension. In other words, the current loan pause will come to a close on December 31, 2022, and borrowers will be responsible for repaying their debt and interest on the first day of the New Year.

Many are wondering, however, if another pause on student loan repayments will be put into place; rightfully so, as thus far, a total of seven extensions have been put into effect.

While some believe that Biden will put another extension into effect that would pause repayments until July of 2023, when the federal student loan programs could be revised, Biden’s announcement of student loan forgiveness, however (if it happens), may prevent any future extensions on repayment and interest pauses.

In other words, no one really knows what will happen, but given the above-mentioned information, it does seem unlikely that any additional extensions on student loan repayment pauses seem unlikely.

As such, borrowers who were already struggling to make payments prior to the Covid crisis and who experienced some relief over the past 2 ½ years may have to begin repaying their loans again in the very near future.

The CARES Act And The Student Loan Freeze

Provisions of the legislation included suspending payments on some types of student loans. Student loan borrowers were already struggling with repaying their debt prior to the onset of Covid, but the economic losses caused by the crisis compounded a situation that was already stressful for millions.

In fact, approximately 95 percent of borrowers reported that they were experiencing increased stress, anxiety, and depression as a result of student loan repayment demands during the Covid crisis.

In an attempt to ease some of this stress, at least for a little while, some of the US taxpayer dollars that were issued by the CARES Act were allocated toward freezing student loans.

The moratorium on student loan payments and interest was applied to all federal student loans that were issued by all servicing companies.

As such, student loans that were on hold as a result of the CARES Act included:

• Direct loans that were funded by the US federal government
• The Federal Perkins Loans that were granted by the Department of Education
• The Federal Family Education Loan program (FFEL) that were backed by the Department of Education
• Defaulted Health Education Assistance loans (HEAL)
• Defaulted FFEL loans that are not regulated by the Department of Education

However, a suspension on student loan payments and interest was not applied to:

• Federal Perkins Loans that were not under the Department of Education
• Non-defaulted Federal Family Education Loans that were not under the Department of Education
• Non-defaulted HEAL loans
• Private student loans
• If your student loans met the above-mentioned requirements, both payments and interest were automatically suspended.

The pause on student loan payments went into effect in March of 2020 and was supposed to end in September of the same year. However, Trump pushed that date back three times, and Biden has pushed the date back four times.

Student Loan Forgiveness

If you are wondering if there will be any more student loan debt forgiveness, this is unknown, too. Given how long it took the Biden administration to come to a decision on widespread student loan debt forgiveness, any additional forgiveness to borrowers via executive order does seem unlikely, as this has been challenged in court.

Likewise, the political climate regarding student loan debt forgiveness is murky. According to polls, the majority of Americans approved of canceling nominal amounts of student loan debt ($10,000); however, support for forgiveness waned at higher levels of forgiveness.

Furthermore, nearly 60 percent of Americans are concerned that student loan debt forgiveness will further worsen inflation, which is already soaring.

Though additional widespread debt forgiveness for student loans is unlikely, the loans of specific borrowers continue to be discharged by the Department of Education.

So far, during Biden’s regime, the agency has canceled $32 billion in student loans. After short-term changes to Public Service Loan Forgiveness (PSLF) program in October of 2021, the loans of more than 175,000 borrowers have been ended, an amount that, as of August of 2022, totals more than $10 billion.

Additionally, the Simplifying and Strengthening PSLF Act has been proposed by members of Congress. This act would, if passed, permanently codify amendments to the PSLF program; however, it is not yet clear whether or not there is enough support to pass the measure.

That said, the temporary changes to the PSLF expired on October 31, 2022. Furthermore, the Department of Education has discharged the loan debt of students who attended specific colleges.

On August 4 of this year, a federal judge approved, on a preliminary basis, a settlement that would provide $6 billion in debt relief to approximately 200,000 borrowers who claim that they have been defrauded by certain colleges, including American National University, Lincoln Tech, and Keiser University.

Borrowers in Default

According to the Department of Education, individuals whose student loans are in default would automatically be given what the agency termed a “fresh start.” In other words, the accounts of borrowers that were defaulted would be returned to good standing; furthermore, any delinquencies would be “cured,” as the agency stated.

It is said that this would make it possible for borrowers to repair their credit and to access certain repayment assistance programs, such as the income-driven repayment plan or a student loan relief program that was designed for borrowers who work for nonprofit or government organizations, known as the Public Service Loan Forgiveness program.

Since the passage of the CARES Act in March 2020, collections on defaulted debts for federal student loan payments have been put on hold.

In April of 2022, Miguel Cardona, the Secretary of Education, stated that preparations would continue to be made to give borrowers a “fresh start” and to ensure that they had access to repayment plans that “meet their financial situations and needs” during the pause.

Preparing For Student Loan Debt Relief

If you are hoping to find relief for your student loan debt, you can submit an application up until December 31, 2023.

The White House, however, has advised individuals who are interested in applying for student loan forgiveness to fill out all necessary paperwork prior to mid-November of 2022 so that their applications can be processed before the student loan repayment dates resume.

Now you have more information about when student loan repayments will likely resume and the different loan forgiveness plans that have been passed and that are being discussed. Let’s take a look at questions that are commonly asked regarding repayments and eligibility for student debt relief.

Q: Who is eligible for student debt relief?

A: If you earn less than $125,000 a year as an individual borrower or you earn less than $250,000 combined with their spouses if they file a joint application, up to $10,000 of your student federal loan debt can be forgiven by the US Department of Education.

In addition to that, if you received federal Pell Grants while you were in college, you would receive an extra $10,000 in debt relief.

Q: What is the eligibility for automatic student loan debt relief?

A: Individuals who are enrolled in the income-driven repayment program and who filed the Free Application for Student Aid (FAFSA) are automatically granted a suspension on their student loan repayments.

Those who qualify for automatic debt removal will receive an email from the Education Department that will inform them that there is no need to apply and that they can decline the student loan forgiveness if they so choose.

Q: What does the application process entail?

A: In order to apply for student loan forgiveness, you will need to provide the following details:

• Your full name
• Your social security number
• Your date of birth
• A valid phone number
• A valid email address

Once you have finished completing the “Borrower Information” section of the application, proceed to the “Review and Submit Agreement” section of the application.

In this part of the application, you will be asked to confirm that you are eligible for relief by providing proof of your income (if you are asked) to the US Department of Education.

Proof of your income would need to be submitted to the Department of Education prior to March 31, 2024.