Federal Student Loan Payment Pause Extended Through January

Facebook icon Twitter icon Print icon Email icon
Kathryn Flynn

By Kathryn Flynn

August 10, 2021

The Biden Administration announced a final extension of the federal student loan pause and interest waiver. Payments will resume on February 1, 2022, giving borrowers an additional four months to prepare.

What the Extension Means for Student Loan Borrowers

The federal student loan payment freeze began in March 2020 as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). After several extensions, President Biden announced that the relief period will ultimately end on January 31, 2022. Federal student loan payments are due on February 1, 2021 and on a monthly basis going forward.

The legislation automatically placed all federal student loans owned by the Department of Education in administrative forbearance with a 0% interest rate. Borrowers who want to continue making payments during the forbearance period should contact their loan servicer. Making principal-only payments may help you pay down your loans faster since you will end up accruing less interest.

Relief measures are also currently in place for borrowers with defaulted federal student loans. Through January 2021, defaulted student loans will not accrue interest and collection agencies are prohibited from wage garnishing and offsetting tax refunds and Social Security payments. Borrowers in default will not receive billing statements or collection calls.

How to Start Making Federal Student Loan Payments Again

Your loan servicer should contact you about restarting your payments, so it’s important to make sure your information is up to date when the student loan pause ends. This includes your address, phone number and bank account details if you were signed up for automatic payments.

Keep in mind, however, that your loan servicer may change. The largest federal student loan servicer, the Pennsylvania Higher Education Assistance Agency, is not renewing its contract with the Department of Education. That means over 8.5 million federal student loan borrowers will have a new loan servicer. These loans will be assigned to a new loan servicer, and borrowers will be contacted with new payment information.

What to Do if You Can’t Afford Your Payments

Many Americans are still facing hardships due to the COVID-19 pandemic. Before your student loan payments come due, look at your budget and make sure you can afford the payments. Borrowers who aren’t able to resume making student loan payments in full have a few options:

  • Consider switching your loan to an income-based repayment plan or an extended repayment plan to potentially reduce your monthly payment amount.
  • Refinance to a loan with a lower interest rate. Interest rates are at all-time lows, and refinancing could save you thousands over the life of your loan. However, you can only refinance into a private student loan. That means you’ll no longer be eligible for federal benefits such as flexible repayment plans and potential student loan forgiveness.

A good place to start:

See the best 529 plans, personalized for you