Since March 2020, the student loan moratorium has stopped payments, frozen interest and delayed collections on most federal student loans.
Here are some things student loan borrowers should know.
Biden Administration: This is the 'Final Extension' of the Student Loan Pause
In its announcement on Friday, the Biden administration characterized this as the "final" extension of student loan relief to "give students and borrowers the time they need" to "restart" repayment. Although there is no legal requirement for this to be the final extension and it is likely that anything will be possible in early 2022/, the Biden administration seems clear that borrowers can expect to resume repayment by February.
The changes to student loan servicing may be completed by early 2022
The servicing transfers would have happened just as the borrowers resume their payments if Biden had not extended his student loan moratorium. This could have led to confusion and chaos. The Department of Education should extend the student loan payment pause until January 2022. This is because FedLoan Servicing and Granite State Management have ended their contracts with them. This will allow the Department of Education enough time to transfer these accounts to new servicers before they resume payments. The Department has already started notifying borrowers to prepare now for student loan servicing changes.
Suspended months will continue to count towards student loan forgiveness programs
Like the extensions to the student loan moratoriums, months of suspended payments will continue to count towards loan forgiveness programs including income-driven repayment terms or Public Service Loan Forgiveness. The suspended months will therefore be treated as if they are being used for these purposes. For student loan borrowers in process of paying off federal student loans, the suspended months will still be counted towards loan rehabilitation plans.
The Department of Education has updated its website to reflect the new extension, and has retained information confirming that the suspended months will be treated the same as before.