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Student Loan Forbearance Extension: What You Need to Know

Stay informed about the latest developments on student loan forbearance extensions. Learn about when payments will resume, the impact of the payment pause, whether you should make payments during the extension, and how to start planning for repayment now. Get expert tips on how to navigate the student loan forgiveness process and manage your debt effectively.

Questions Answered in this Article

Q: When exactly will payments resume? A: It is uncertain when payments for student loans will resume. The expiration date for forbearance depends on when the Supreme Court makes a decision on legal challenges to President Biden’s student debt relief plan. If the Court rules on the plan before June 30, 2023, borrowers with remaining balances will have to start repaying loans 60 days after the court decision, and interest will also start accruing again. If the Court does not make a decision before June 30, 2023, forbearance will end and borrowers will have to start repaying loans 60 days after June 30, at which point interest will also start accruing again.

Q: What does the payment pause do? A: The payment pause, also known as forbearance, allows federal student loan borrowers to temporarily stop making payments on their loans. During forbearance, the interest rate on the loans is set to 0%, and collections activities on defaulted loans are halted.

Q: Should you make payments during the extension? A: The decision on whether to make payments during the forbearance extension depends on your remaining loan balance and ability to pay. If your loan balance would be fully canceled under the current debt relief plan, it is advisable not to make payments during the extension. Borrowers enrolled in loan forgiveness programs like Public Service Loan Forgiveness, will see their payment count increase each month regardless of whether a payment is made. On the other hand, if you will still have a loan balance even if the debt relief plan is applied, it is advisable to make payments during the extension if you can.

Q: Should you start planning for repayment now? A: Start planning for repayment of your student loans now, regardless of the current forbearance period. Practice making these payments now. Take the equivalent of what you would pay toward your student loans and use these funds to increase your emergency fund or pay off some other liabilities. Contact your loan provider to confirm your monthly payments and plan accordingly. If you find that you will not be able to cover the full amount, consider enrolling in an income-driven repayment plan.

Q: What is the expected outcome of President Biden’s plan to cancel up to $20,000 in student debt per borrower? A: It is uncertain what the outcome of President Biden’s plan to cancel up to $20,000 in student debt per borrower will be as it is currently being challenged in the Supreme Court and oral arguments are scheduled for February 28th. The Court has promised a quick decision, but it may take months to be finalized. Unless the President extends forbearance again, repayment will begin 60 days after the Education Department is able to implement the one-time debt cancellation, the litigation is resolved, or 60 days after June 30, 2023, whichever comes first.

Student Loan Forbearance Extension: What You Need to Know

The U.S. Department of Education announced in November that students may not have to make payments until as late as summer 2023. However, the forbearance period may end earlier if the Supreme Court makes a decision on President Biden’s plan to cancel up to $20,000 in student debt per borrower before then. Oral arguments for this plan are scheduled for February 28th, and while the court has promised a quick decision, it may take months to be finalized. Unless the President extends forbearance again, repayment will begin 60 days after the Education Department is able to implement the one-time debt cancellation, the litigation is resolved, or 60 days after June 30, 2023, whichever comes first.

When Will Payments Resume for Student Loans?

It is uncertain when payments for student loans will resume. The expiration date for forbearance depends on when the Supreme Court makes a decision on legal challenges to President Biden’s student debt relief plan. If the Court rules on the plan before June 30, 2023, borrowers with remaining balances will have to start repaying loans 60 days after the court decision, and interest will also start accruing again. If the Court does not make a decision before June 30, 2023, forbearance will end and borrowers will have to start repaying loans 60 days after June 30, at which point interest will also start accruing again.

MORE: Navigating the Future of Student Loans: Key Questions and Answers

What Does the Payment Pause (Forbearance) Do?

The payment pause, also known as forbearance, allows federal student loan borrowers to temporarily stop making payments on their loans. This was first ordered by then-President Donald Trump in March 2020 as the COVID-19 pandemic took hold. During forbearance, the interest rate on the loans is set to 0%, and collections activities on defaulted loans are halted.

For borrowers in standard repayment plans, their previous loan balances will still be waiting for them when payments resume, minus any debt cancellation that may survive court challenges. However, borrowers in income-driven repayment plans, which cancel remaining debt after a certain number of payments have been made, will be somewhat better off as each month that passes during the payment pause will still count towards their totals.

The November announcement marked the eighth time the government has extended interest-free forbearance, most recently from a previous Dec. 31, 2022 expiration date. This means roughly 40 million borrowers who were supposed to start paying their bills again in January now have additional time without them. However, it is important to note that after nearly three years without student loan bills and an uncertain future for cancellation, not everyone should continue the payment holiday.

MORE: Managing Student Loan Debt: Understanding Your Options

Should You Make Payments During the Extension?

The decision on whether to make payments during the forbearance extension depends on your remaining loan balance and ability to pay.

If your loan balance would be fully canceled under the current debt relief plan, it is advisable not to make payments during the extension. Instead, you can set aside the money you would have used for your student loan payments in a separate account, in case the cancellation plan does not come to fruition.

Borrowers enrolled in loan forgiveness programs like Public Service Loan Forgiveness, will see their payment count increase each month regardless of whether a payment is made. These borrowers should not make payments during the extension.

On the other hand, if you will still have a loan balance even if the debt relief plan is applied, it is advisable to make payments during the extension if you can. This will help you to pay off your loans sooner and at a lower cost.

It’s important to note that whether or not the current debt relief plan survives, you will still have to repay your loans. Any money you pay towards your loans during the forbearance period will go towards the loan principal and even partial payments can help.

Start Planning for Repayment Now

It’s important to start planning for repayment of your student loans now, regardless of the current forbearance period. The pause could end sooner than June 30 if the Supreme Court makes a decision on the current debt relief plan before then.

Kristen Ahlenius, Director of Education at Your Money Line suggests “Practice making these payments now. Take the equivalent of what you would pay toward your student loans and use these funds to increase your emergency fund or pay off some other liabilities. You’ll be prepared in case student loan forgiveness remains struck down and improve your financial health in the interim.”

It’s a good idea to contact your loan provider to confirm your monthly payments and plan accordingly. This amount could decrease if the debt relief plan is applied, but it’s always better to plan for the worst.

If you find that you will not be able to cover the full amount, consider enrolling in an income-driven repayment plan. These plans cap your monthly payments at a certain percentage of your disposable income, making them more manageable while also extending the life of your loan. If your income is low enough, your payments could be $0. A revised IDR plan is expected to roll out later this year, with even more generous terms.

MORE: How Income-Driven Repayment Plans Can Help You Manage Your Student Loan Payments

Summary

  • The U.S. Department of Education announced in November that students may not have to make payments until as late as summer 2023.
  • The forbearance period may end earlier if the Supreme Court makes a decision on President Biden’s plan to cancel up to $20,000 in student debt per borrower before then.
  • Oral arguments for this plan are scheduled for February 28th, and while the court has promised a quick decision, it may take months to be finalized.
  • Unless the President extends forbearance again, repayment will begin 60 days after the Education Department is able to implement the one-time debt cancellation, the litigation is resolved, or 60 days after June 30, 2023, whichever comes first.
  • The payment pause, also known as forbearance, allows federal student loan borrowers to temporarily stop making payments on their loans.
  • The decision on whether to make payments during the forbearance extension depends on your remaining loan balance and ability to pay.
  • Borrowers enrolled in loan forgiveness programs like Public Service Loan Forgiveness, will see their payment count increase each month regardless of whether a payment is made.
  • Start planning for repayment of your student loans now, regardless of the current forbearance period.
  • Contact your loan provider to confirm your monthly payments and plan accordingly.
  • If you find that you will not be able to cover the full amount, consider enrolling in an income-driven repayment plan.
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