Here’s How Biden’s Plan To Pause Student Loans Works

President Joe Biden paused student loan payments for eight months. This is how it works.

Here’s what you need to know—and what it means for your student loans.

Student Loans

On his first day as president, January 20, 2021, Biden paused federal student loan payments through September 30, 2021. What does this mean for your student loans? How does it work? Let’s answer the most popular questions about this student loan relief:

1. Which student loans are included?

This student loan relief applies only to federal student loans, which means the federal government is your lender. 

2. How do you know if you have federal student loans? 

You can check if you have federal student loans by accessing the National Student Loan Data System (NSLDS®). Use your Federal Student Aid (FSA) ID to login.

3. Are all federal student loans eligible?

No. Only Direct student loans that are owned by the U.S. Department of Education are eligible for this student loan relief. This includes, for example, Direct Subsidized Loans and Direct Unsubsidized Loans. However, if you have FFELP Loans or Perkins Loans, unfortunately they are ineligible. Why? The federal government doesn’t own these student loans. FFELP Loans were issued by financial institutions and may be owned by private investors. Perkins Loans are issued by colleges and universities. 

4. Is this student loan relief different than President Trump’s student loan relief?

Congress granted this student loan relief as part of the Cares Act, the $2.2 trillion stimulus package that Congress passed in March. Trump extended this student loan relief from October 1, 2020 through December 31, 2020. Then, Trump extended this student loan payment pause again through January 31, 2021. Biden then extended the same student loan relief through September 30, 2021. Congress could grant additional student loan relief or even cancel student loans in the new stimulus package. One important question, however, will be how much student loan forgiveness and who qualifies.

5. Is this student loan payment pause permanent?

No, this is a temporary student loan forbearance. Through September 30, 2021, you are not required to make federal student loan payments. However, this student loan payment pause will not last forever. Absent any extension, your federal student loan payments will be due starting October 1, 2021.

6. Will Biden extend this student loan relief beyond September 30, 2021?

There is no guarantee that Biden will extend student loan relief beyond September 30, 2021. Since the passage of the Cares Act last March, Biden’s extension through executive order is the longest extension to date for this student loan relief. Rather than pause student loan payments for three-month increments, Biden chose a single eight-month extension. In determining whether to extend student loan relief any further (or to end the temporary forbearance), Biden will evaluate several factors, including the state of the Covid-19 pandemic and the associated economic recovery.

7. Will I get credit toward student loan forgiveness while my student loan payments are paused?

Yes, you will get “credit” toward student loan forgiveness even if your student loan payments are paused. For example, the Public Service Loan Forgiveness program requires 120 monthly student loan payments. Even if you don’t make any federal student loan payments during this payment pause, you can still get credit toward the 120 monthly payments as if you made your student loan payments. Similarly, income-driven repayment plans require 20 to 25 years of monthly student loan payments to get student loan forgiveness. If you don’t make federal student loan payments during this period, you can still get “credit” as having made your student loan payments for purposes of qualifying for student loan forgiveness.

8. What happens to my student loan balance during the payment pause?

If you don’t make any federal student loan payments through September 30, 2021, your student loan balance for your federal student loans shouldn’t change. There is no new interest accrual during this period either. Once this temporary student loan forbearance ends, interest will resume and your student loan balance may grow again.

9. Can I make student loan payments during this payment pause?

Yes, you can make student loan payments during this payment pause. It’s completely optional whether you want to stop making federal student loan payments. You can continue to pay each month, pay for a month and then skip a month, or any other combination. You can also make a one-time, lump-sum student loan payment too.

10. Why would I make student loan payments if I don’t have to?

If you’re struggling to pay student loans, then this student loan forbearance may be a big financial help. If you have limited financial resources, as millions of Americans do during the Covid-19 pandemic, then you can defer federal student loan payments through September 30, 2021. If you have extra financial resources and want to pay any amount of federal student loans, you can. Importantly, you can pay any amount during this temporary forbearance. For example, your payment during this period doesn’t have to be pay your usual monthly payment amount. The reason to pay student loans now is that there is no interest accrual. So, every dollar you pay will first pay off any existing interest (from before the student loan payment pause), and then any remaining amount will directly lower your student loan principal balance. So, if you have extra money, this is an opportune time to pay off student loans and lower your student loan balance.

11. What does this student loan relief mean for student loan cancellation?

Will your student loans get cancelled? Biden wants to cancel student loans immediately. However, Biden says he wants Congress to cancel student loans, which Congress could enact through standalone legislation or as a component of the new stimulus package. That said, Congress dropped student loans from the last stimulus package, and Biden didn’t include student loan cancellation is his proposed $1.9 trillion stimulus package. This new student loan relief potentially could impact student loan cancellation in several ways.

How to pay off student loans faster

What’s the best way to pay off student loans? This temporary student loan forbearance is good news for millions of student loan borrowers who are struggling to pay off student loans and need financial reprieve. At the same time, this student loan relief won’t last forever. That’s why it’s important to understand your options for student loan repayment now, particularly if student loan cancellation doesn’t happen. Get your financial game plan ready today, so you’re not unprepared when this student loan relief ends. 

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