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After five payment pauses that began roughly two years ago, federal student loan payments are set to resume in May 2022.
The first payment suspension came in March 2020 when Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act and lasted for six months through September 2020. The second and third pauses came via presidential executive order (one from Trump and one from Biden) and extended the payment pause through January 2021 and again through September 2021. The Department of Education set a fourth extension through January 31, 2022. Then in December 2021, President Biden announced a fifth pause through May 1, 2022, due to ongoing public health challenges.
Here are some things to know as payments get set to resume.
Payments made during moratorium. Borrowers who chose to continue making full or partial payments during the suspension period will have the full amount of their payments applied to principal, which will draw down their loans faster.
Payments not made during moratorium. Borrowers who didn’t make payments during the suspension periods won’t be worse off because interest did not accrue on their loans. Essentially, the interest rate was set at 0%.
Auto-debit payments. According to the Department of Education, borrowers who signed up for auto-debit before March 13, 2020 (the date the first payment pause began) will be contacted by their loan servicer before the payment pause ends to confirm whether they want to stay on auto-debit. If borrowers do not respond to these communications, their servicer will stop auto-debit. For borrowers who signed up for auto-debit after March 13, 2020, their auto-debit payments will resume automatically on the first due date when payments begin again. Borrowers who have questions about their auto-debit status or who need to update their banking information on file should contact their loan servicer.
Hardship options. Borrowers who still face financial hardship when the moratorium ends can request a loan deferment or forbearance, which generally pauses payments for six months. The federal government’s Loan Simulator tool can help borrowers understand the impact of suspending payments and identify loan repayment plans that may help lower payments, such as an IDR (income-driven repayment) plan. The tool is available online at studentaid.gov/loan-simulator.
The articles and opinions expressed in this document were gathered from a variety of sources, but are reviewed by Strickland Financial Group, LLC prior to its dissemination. Any articles written by Graham M. Strickland or Strickland Financial Group will include a ‘by line’ indicating the author. Strickland Financial Group provides a full range of financial services, including but not limited to: life, health, disability and long term care insurance, group and individual retirement plans and individual investments. Receipt of literature in no way implies suitability of product(s) in your financial plan. Strickland Financial Group maintains networking relationships with estate planning attorneys and tax professionals but does not itself offer legal or tax advice. Securities offered through Triad Advisors, LLC (TRIAD), Member FINRA/SIPC. Advisory services offered through S&S Wealth Management, LP (S&S). A Registered Investment Advisor. Strickland Financial Group is independent of TRIAD and S&S.
