In April, the U.S. Department of Education announced it was extending federal student loan deferment until Aug. 31, 2022. The extension put a temporary pause on all federal student loan payments and interest charges for 35 million Americans. It also temporarily paused collections on defaulted loans for 7 million Americans.
This extension gives federal student loan borrowers additional time before their payments resume, and will hopefully result in fewer defaults and delinquencies.
"It remains a top priority for the Biden-Harris Administration to support students, families, and borrowers — especially those disproportionately impacted by the pandemic," U.S. Secretary of Education Miguel Cardona said in a statement when the deferment extension was announced.
Once payments resume, refinancing your federal student loans into private loans could be an option to help you manage your student debt. However, think carefully before doing so. Keep in mind that you’ll lose federal benefits and protections if you decide to refinance.
Learn more about student loan refinancing by visiting Credible and comparing rates from multiple private student loan lenders.
- Will President Biden pause federal student loan payments again?
- When will federal student loan payments resume?
- What are your options for student loan forgiveness?
As the Aug. 31 deadline draws closer, many are wondering if President Joe Biden will extend student loan deferment. Others wonder if the Biden Administration will forgive student loans. While no one knows for sure, another deferment wouldn’t be unprecedented.
Congress originally enacted student loan deferment with the passing of the CARES Act in March 2020. The pause on federal student loan payments was supposed to last for just six months, but since then it’s been extended six times.
Former President Donald J. Trump extended the deferment twice, and President Biden has extended it four times. And each new extension was granted shortly before the current one was set to expire. Many Americans still face economic challenges as inflation rises to historic levels and fears of an upcoming recession linger.
In late June, 180 advocacy groups sent President Biden a letter urging him to extend federal student loan deferment. The letter urged the president "not to threaten the financial security of people with student debt as a tactic to fight inflation."
If you decide to refinance once payments resume, you can easily compare prequalified rates from multiple lenders using Credible.
Aug. 31 is when the current payment pause is set to expire, which means federal student loan payments would resume after that date. The U.S. Department of Education has promised to give student loan borrowers "ample notice" before their payments resume. The clock is running out for them to do this, which has led some to speculate that payments will be deferred once again.
Assuming the student loan deferment does expire on Aug. 31, you’ll receive a billing statement or notice at least 21 days before your payment is due. You can contact your student loan servicer to request an estimated payment amount and due date.
To ensure you’re prepared for payments to resume, the U.S. Department of Education recommends taking the following steps:
- Update your contact information with your loan servicer and in your StudentAid.gov profile.
- Review or sign up for automatic payments on your servicer’s website.
- Use the StudentAid.gov Loan Simulator to find a repayment plan that works for your budget.
- Consider enrolling in an income-driven repayment plan.
If the CARES Act extension expires at the end of August, other options are available. The U.S. Department of Education offers several repayment plans that provide eventual loan forgiveness.
Here are some options to consider:
- Income-driven repayment (IDR) plans — When you sign up for an income-driven repayment (IDR) plan, your monthly student loan payment is calculated at a percentage of your discretionary income and household size. Each plan provides loan forgiveness if you haven’t paid off your student loans at the end of the repayment period.
- Public Service Loan Forgiveness (PSLF) — The Public Service Loan Forgiveness (PSLF) Program provides full loan forgiveness to borrowers after making 120 qualifying repayments. To qualify for PSLF, you must work full-time for a U.S. federal, state, local, or tribal government or qualifying not-for-profit organization.
- Pay As You Earn (PAYE) — The Pay As You Earn (PAYE) Plan is a type of income-driven repayment plan. Under this plan, your monthly payment is set at 10% of your discretionary income, and it’s never more than the standard 10-year repayment plan. With the PAYE Plan, you’ll receive loan forgiveness after 20 years.
- Income-Based Repayment (IBR) — The Income-Based Repayment (IBR) Plan is another IDR plan, and it’s available to new borrowers as of or after July 1, 2014. Your monthly payment is set at 15% of your discretionary income, and it’s never more than the standard 10-year repayment plan. The IBR Plan also comes with full loan forgiveness after 20 years.
Get a head start on learning more about your options for refinancing once payments resume. Visit Credible and compare prequalified rates from multiple lenders.