Lori Meadows
The Coronavirus pandemic has caused temporary financial hardship for many Americans, making it difficult for many federal student loan borrowers to keep up with their monthly payments. In March 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act put federal student loans into automatic administrative forbearance, pausing interest accrual on these loans. The original moratorium on interest and payments was set to expire on September 30, 2020, but it has since been extended multiple times by the Trump and Biden administrations. The most recent extension, announced by the Biden administration in November 2022, will keep the loan forbearance program in place until court cases are resolved in 2023. While this relief has been instrumental in preventing delinquencies and defaults, borrowers may want to consider their options for when the forbearance period ends.
| Characteristics | Values |
|---|---|
| Moratorium on interest and payments start date | March 13, 2020 |
| Moratorium on interest and payments end date | June 30, 2023 |
| Interest accrual during the moratorium period | No |
| Interest accrual after the moratorium period | Yes |
| Moratorium extension count | Seven |
| Moratorium extension date | November 22, 2022 |
| Moratorium extension announcement | Biden administration |
| Moratorium extension end date | Sometime in 2023 |
| Moratorium extension reason | To resolve court cases |
| Loans covered under the moratorium | Direct loans, defaulted and non-defaulted |
| Loans not covered under the moratorium | Federal Family Education Loans, Perkins loans |
| Moratorium applicability | Only on certain loans from the Department of Education |
| Moratorium applicability on private student loans | No |
| Moratorium applicability on federal student loans | Yes |
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What You'll Learn
Student loan forbearance ends in 2023
The Coronavirus Aid, Relief, and Economic Security (CARES) Act provided federal student loan borrowers with a break from monthly payments during the coronavirus pandemic. The original moratorium on interest and payments began on March 13, 2020, and was set to expire on September 30, 2020. However, there have been several extensions since then. On November 22, 2022, the Biden administration announced that the loan forbearance program would be extended into 2023 until court cases were resolved. This means that payments on federal student loans owned by the Department of Education are currently suspended, and no interest will accrue during this time.
The most recent update suggests that administrative forbearance has been extended for the ninth time and will now end on either August 29, 2023, or 60 days after the Supreme Court decision on forgiveness, whichever date is sooner. After this date, payments will resume, and interest will accrue.
It is important to note that borrowers have the option to continue making loan payments during forbearance. If you choose to do so, your entire payment will go towards reducing the principal balance on your loan after any interest that accrued before March 13, 2020, is paid. Making payments during forbearance can help you reduce your loan balance more quickly.
If you are concerned about your ability to make payments when forbearance ends, there are options available to you. You can consider consolidating your student loans and shopping around for the best loan rates and terms. Additionally, you can contact your loan servicer to discuss alternative repayment plans, such as income-driven repayment (IDR) plans or extended and graduated payment plans. These plans can lower your monthly payments and make repaying your debts more manageable.
It is recommended to take action now if you think you may struggle to resume payments when the student loan forbearance period ends. Review your budget, update your income and family size information, and consider seeking advice from a student loan lawyer or financial advisor to explore your options.
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Interest accrual paused
The Coronavirus Aid, Relief, and Economic Security (CARES) Act provided a major break for federal student loan borrowers, exempting them from monthly payments and interest accrual during the coronavirus pandemic. The original moratorium on interest and payments began on March 13, 2020, and was set to expire on September 30, 2020. However, there have been several extensions since then. The most recent extension, announced by the Biden administration on November 22, 2022, stated that the loan forbearance program will remain in place until court cases are resolved in 2023. No interest will accrue during this time, providing much-needed relief for borrowers.
The method of halting interest accrual by lowering interest rates to zero raised questions about whether borrowers' monthly payments would change. While the Department of Education (ED) did not initially confirm whether this would be the case, waiving interest accrual would result in more of a borrower's payment going toward the principal balance. This left advocates concerned for those seeking immediate relief.
ED officials confirmed that the interest accrual pause would apply to all federal loans, including those in income-driven repayment plans, those in forbearance, federally-held Federal Family Education Loan Program (FFELP) loans, and federally-held Perkins loans. This comprehensive approach ensured that a wide range of borrowers benefited from the pause in interest accrual.
While the pause on interest accrual provides temporary relief, some experts argue that more needs to be done to support borrowers facing economic uncertainty. Suggestions include pressing pause on student loan payments entirely and ensuring that borrowers are still on track for loan forgiveness if they are on income-driven repayment plans. These additional measures could provide further assistance to those struggling financially due to the pandemic.
As of June 30, 2023, the student loan interest pause is expected to end, with interest beginning to accrue the following day. Borrowers are encouraged to review their budget, including their monthly costs and income, to prepare for the resumption of interest accrual and potential increases in monthly payments. Additionally, borrowers can explore flexible repayment options, such as income-driven repayment plans, to manage their loan obligations effectively.
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Payment options and plans
The Coronavirus Aid, Relief, and Economic Security (CARES) Act provided federal student loan borrowers with a break from monthly payments during the coronavirus pandemic. The original moratorium on interest and payments began on March 13, 2020, and was set to expire on September 30, 2020. Since then, there have been several extensions. The most recent extension was announced on November 22, 2022, by the Biden administration, which stated that the loan forbearance program would be in place until court cases were resolved in 2023.
- Income-driven repayment plans: These plans allow you to make payments based on your actual income, usually between 10% to 25% of your discretionary income. If you don't have any income or are receiving Social Security benefits, your monthly payment could be zero. Examples of income-driven repayment plans include IBR, ICR, PAYE, or REPAYE.
- Extended and graduated payment plans: These plans can lower your monthly payments and make repaying your debts more manageable.
- Deferment or forbearance: If you are facing financial hardship, you may be able to pause your payments temporarily by requesting deferment or forbearance from your loan servicer.
- Consolidating your student loans: If you have multiple student loans, you may be able to consolidate them into a single loan with a lower interest rate or more favourable terms.
- Refinancing: If you have private student loans and are struggling to make payments, you may want to consider refinancing to take advantage of lower interest rates.
- Public service loan forgiveness: If you work full-time for a qualifying employer, such as a government agency or a non-profit organisation, you may be eligible for public service loan forgiveness. Under this program, your non-payments during the suspension period will count toward the required 120 monthly payments.
It's important to remember that the CARES Act and its payment relief apply only to federal loans. If you have private student loans, you may need to explore different options, such as refinancing or contacting your loan servicer to discuss alternative repayment plans. Additionally, you have the option to continue making loan payments during forbearance, which can help reduce your loan balance more quickly.
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Loan consolidation
The Coronavirus Aid, Relief, and Economic Security (CARES) Act provided financial relief to federal student loan borrowers during the coronavirus pandemic. The Act put loans into automatic administrative forbearance, pausing payments and interest accrual. The moratorium on interest and payments began on March 13, 2020, and has been extended multiple times. The most recent extension, announced by the Biden administration on November 22, 2022, will be in place until court cases are resolved in 2023.
However, consolidation is not always advantageous. Borrowers who consolidate their loans may lose certain benefits, such as principal rebates, loan cancellation, or interest rate discounts. Additionally, any interest owed on the original loans will be added to the principal of the consolidation loan, which can result in paying more interest over time. Consolidation can also erase any progress made toward Public Service Loan Forgiveness (PSLF) programs.
Before consolidating their loans, borrowers should carefully consider their options and shop around for the best type of loan, rates, and terms. Consolidation may not be the best choice for every borrower, and there may be other options available, such as deferment or forbearance, that can provide temporary relief from monthly payments.
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Student loan forgiveness
The Coronavirus pandemic has caused financial challenges for the more than 40 million Americans with student loans. While the federal government has provided some relief in the form of stimulus packages and forbearance, many borrowers are still seeking loan forgiveness.
President Joe Biden has expressed support for forgiving a minimum of $10,000 in federal student loan debt per borrower. This proposal is intended to provide relief to borrowers struggling with debt during the pandemic. However, it's important to note that this forgiveness is not guaranteed and has faced opposition. Senate Republicans, in particular, are unlikely to support loan forgiveness of any kind.
Additionally, there are potential disadvantages to loan forgiveness. If the forgiven debt is considered taxable income, borrowers could face significant tax burdens. Biden has opposed this idea, arguing that people relieved of debt should not be burdened with new tax debts. The taxability of any loan forgiveness remains uncertain.
Current Relief Measures
The Coronavirus Aid, Relief, and Economic Security (CARES) Act provided temporary relief for federal student loan borrowers by pausing payments and interest accrual. This forbearance has been extended multiple times, with the most recent extension announced by the Biden administration on November 22, 2022, pushing the resumption of payments into 2023.
While this forbearance provides temporary relief, borrowers are encouraged to use this time to develop long-term strategies for managing their debt. Flexible repayment options, such as income-driven plans, may be available to help borrowers manage their loan payments when they resume.
The financial impact of the pandemic has heightened the need for student loan forgiveness and relief measures. While the future of widespread loan forgiveness remains uncertain, borrowers can take advantage of the current forbearance period to explore their options and prepare for repayment when it resumes.
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Frequently asked questions
The Biden administration announced that the loan forbearance program will be in place until court cases are resolved in 2023. The latest update suggests that the student loan interest is on hold until 30 June 2023.
If you can't afford your student loan payments, you can contact your loan servicer to discuss your options. You may be eligible for an income-driven repayment plan, or you could request a deferment or forbearance, which can pause your payments temporarily.
The CARES Act, or the Coronavirus Aid, Relief, and Economic Security Act, provided relief to federal student loan borrowers by putting their accounts into an automatic emergency forbearance and pausing interest accrual on these loans for six months.
Most student loans will qualify for the coronavirus forbearance, but some won't. All Direct federal loans are eligible. Many Parent Plus loans should qualify too. However, Federal Family Education Loans (FFELs) and Perkins loans will only be eligible if they are "federally held".
