During his first day in office President Joe Biden signed 17 executive actions, including a request to extend the COVID relief flexibilities for federal student loans. According to the Department of Education, the payment pause and interest waiver have been extended “at least” through September 30, 2021.
Relief Available for Federal Student Loan Borrowers
COVID relief measures for student loan borrowers first became available in March, and then were included in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), with a September 30, 2020 deadline. The deadline had been extended through December 31, 2020, and again through January 31, 2021 before the latest extension.
The pandemic drove job losses to an all-time high in 2020, which intensified the growing issue of student debt among young adults. The student loan relief measures are intended to help ease the financial burden of borrowers who are facing hardship during the economic crisis. President Biden also extended the eviction moratorium for renters and the foreclosure moratorium for federally backed mortgages through March 31, 2021.
Who Qualifies for Student Loan Relief?
Only student loans that are owned by the Department of Education are eligible for the payment pause and interest rate waiver. Private student loans, and any loans that are not owned by the Department of Education are not eligible.
|Student Loans Eligible for COVID Relief||Student Loans Not Eligible for COVID Relief|
|Direct Loans (defaulted and nondefaulted)||Private student loans|
|FFEL Program loans (defaulted and nondefaulted)||FFEL Program Loans owned by commercial lenders|
|Federal Perkins Loans (defaulted and nondefaulted)||HEAL Loans owned by commercial lenders|
|Defaulted HEAL loans||Perkins Loans owned by a college|
What Types of Student Loan Relief Are Available?
The Department of Education is offering a payment pause and a 0% interest rate on eligible federal student loans and has stopped collections on defaulted loans. Here’s how each benefit works.
Student loan payment pause
Eligible federal student loans are placed in administrative forbearance until at least September 30, 2021. That means loan payments, including auto-debits, are suspended and borrowers don’t have to make payments. Student loan payments were automatically paused, so borrowers could immediately take advantage of the benefit. If you’re unsure whether or not you should be making payments, check your loan status. Loans that are eligible for relief will show as being in forbearance.
If you prefer to make payments during the relief period, you can opt out of the payment pause by calling your loan servicer. By opting out, you agree to be billed or resume auto-debits, and your payments will be applied directly to your principal balance. Making principal-only payments is an effective way to pay down your loan. With a smaller principal balance, you’ll accrue less interest going forward when the relief period expires.
If you can’t afford to continue making your regular payment but you still want to pay down your balance, you also have the option to make smaller payments during forbearance.
Student loan interest waiver
Federal student loans have a temporary 0% interest rate during the COVID relief period. Like the payment pause, the waived interest rate is also automatic. Again, borrowers with the means to do so can take advantage of the temporary interest waiver by paying down their principal balance.
Stopped collections on defaulted student loans
During the relief period, collection agencies are prohibited from wage garnishing, offsetting income tax refunds and other involuntary collection activities for borrowers who have defaulted student loans. You may be eligible for a refund for collections that occurred between March 13, 2020 and the relief expiration date.
What Happens When the Relief Period Ends?
Remember, COVID student loan relief is temporary and once the period expires you will have to start making payments toward your federal student loans again. Borrowers who are still having trouble making payments may want to consider a different federal repayment plan, such as an income-based repayment plan or an extended repayment plan.