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A pause on federal student loan payments that began more than two years ago will now continue through Dec. 31, President Joe Biden said Wednesday. The extension — coming just a week before payments were scheduled to resume — was included in Biden's announcement on Twitter that the government will forgive up to $20,000 of federal student loan debt for borrowers who have received Pell Grants and $10,000 for all others. The relief is limited to individuals with income of less than $125,000 or, for families, under $250,000. This marks the seventh time the government has continued the freeze on loan payments. It began in March 2020 under President Donald Trump when the Covid pandemic upended the U.S. economy and has been continually renewed since then. This will be the final extension, Biden said. More from Personal Finance: For borrowers, the reprieve translates into having a few more months of extra cash in their budgets — which means it's worth considering how best to use that money before payments resume. If you have no emergency savings, it may be worth setting aside what you're not paying to a student loan servicer so you have a cushion going forward, said certified financial planner Carolyn McClanahan, founder of Life Planning Partners in Jacksonville, Florida. "The first thing is to make sure you have an emergency fund," McClanahan said. Financial experts typically recommend having at least three to six months' worth of income set aside in case of a job loss or other unexpected expenses. If you already have emergency savings, look at your 401(k) plan to be sure you're contributing enough to get the employer's matching contributions, McClanahan said. You also should look at any debt with a high interest rate — like credit cards. The average rate on that plastic is currently about 18%, which generally is higher than other forms of consumer debt such as a mortgage or an auto loan. "If they have high-interest debt, use this time to get that debt down," McClanahan said. Otherwise, she said, "you can save it and then make bigger payments when they restart." More than 40 million Americans are in debt for their education, owing a cumulative $1.7 trillion. In addition to forgiving up to $20,000 in student debt for qualified borrowers, President Joe Biden announced he was extending the current moratorium on student loan payments and interest until Jan. 1, 2023. Student loan payments have been paused since March 2020, when the CARES Act was passed by Congress. They were set to resume in Sept. 2020 but the freeze was extended three times by former President Donald Trump and now a total of four more times by Biden. Here's what you need to know about federal student loan payments, including which loans are paused, what happens to borrowers who are in default, and whether there will be any further student loan payment pauses. For more on student debt, find out if you qualify for a public student loan forgiveness waiver, if you should keep paying off your loan during the pause, and the benefits (and drawbacks) of refinancing your student loan. Which student loans are currently paused?The moratorium on student loan payments and interest includes all federally held student loans, regardless of what company is servicing the loan. Eligible student loans include:
Student loans that are not eligible include:
If your student loans are eligible, payments and interest were automatically paused on March 13, 2020. If you're not sure whether your loan payments are paused or not, contact your loan servicer. Will the student loan payment freeze be extended again?The pause on federal student loan payments is slated to expire on Dec. 31, 2022, with payments expected to resume on Jan. 1, 2023. Nothing is set in stone, but in his announcement, Biden said he was continuing the moratorium "one final time" to the end of the year. Will there be any more student debt forgiveness?Judging by the length of time it took Biden to make a decision on widespread student loan debt forgiveness, it's unlikely that any further forgiveness will be given to all student loan borrowers via executive order. It's not clear yet if Biden's current order to cancel $10,000 to $20,000 for all federal student loan borrowers will be challenged in court or if anyone even has the standing to file a lawsuit against it. The political climate on student loan debt forgiveness is likewise murky: An Ipsos/NPR poll found that a majority of Americans approve of canceling $10,000 of student loans, but support for forgiveness decreased at higher levels of relief. In addition, 59% of Americans are worried that student loan forgiveness will make inflation worse. According to a separate CNBC/Momentive survey from early August, nearly a third of respondents (30%) opposed student loan forgiveness for anyone. While further widespread student loan debt forgiveness is unlikely, the Department of Education continues to discharge loans of specific borrowers -- the agency has canceled $32 billion of student loans during Biden's term. Following temporary changes to the Public Service Loan Forgiveness program in October 2021, more than 175,000 borrowers have had their student loans extinguished, totaling more than $10 billion as of August 2022. Members of Congress have proposed the Simplifying and Strengthening PSLF Act, which permanently codifies the changes to the PSLF program, but it's not clear whether the measure has enough support to pass. Otherwise, the temporary changes to PSLF will expire Oct. 31, 2022. The Department of Education has also discharged loans to students from certain colleges. On Aug. 4, a federal judge preliminarily approved a settlement that would give $6 billion in debt relief to roughly 200,000 borrowers who say they were defrauded by colleges like Lincoln Tech, American National University and Keiser University. What happens to borrowers who were in default?Borrowers in default will automatically be given a "fresh start," according to the US Department of Education. All defaulted accounts will be returned to good standing, and any delinquencies will be "cured," allowing borrowers to repair their credit and access programs like income-driven repayment plans and Public Service Loan Forgiveness, a student loan relief program designed for borrowers who work for the government or nonprofit organizations. Since the federal student loan payment pause began in March 2020, collections on defaulted debts have been put on hold. In an April 2022 statement, Secretary of Education Miguel Cardona said, "During the pause, we will continue our preparations to give borrowers a fresh start and to ensure that all borrowers have access to repayment plans that meet their financial situations and needs." Correction, Aug. 26: This story earlier misstated that Keiser University is a for-profit school. Keiser University converted from for-profit to nonprofit status in January 2011. Will the student loan pause be extended past August 2022?To ensure a smooth transition to repayment and prevent unnecessary defaults, the pause on federal student loan repayment will be extended one final time through December 31, 2022. Borrowers should expect to resume payment in January 2023.
Will student loan forbearance be extended again 2022?The pause on federal student loan payments is slated to expire on Dec. 31, 2022, with payments expected to resume on Jan. 1, 2023. Nothing is set in stone, but in his announcement, Biden said he was continuing the moratorium "one final time" to the end of the year.
Will Biden extend the student loan pause?To ensure a smooth transition to repayment and prevent unnecessary defaults, the Biden-Harris Administration will extend the pause a final time through December 31, 2022, with payments resuming in January 2023.
How long will the student loan pause be extended?While the U.S. Department of Education previously stated that the forbearance period would end on Aug. 31, its most recent press release says that the extension was implemented in response to the lingering COVID-19 impacts. The student loan payment pause now ends on Dec. 31, 2022.
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