President Joe Biden has extended student loan relief through January 31, 2022 and here’s what it really means for your student loans.
Here’s what you need to know.
Student loan relief will end permanently in January
The Biden administration made it clear in its student loan relief extension announcement that January 31, 2022 will be the official end. This means that you need to prepare for the end of student loan forbearance and the start of student loan repayment. Don’t expect another extension of student loan relief, as this is the last call. This final extension is done despite the future of the Covid-19 pandemic. And this despite the future of the economy. This despite all future difficulties. Get your financial house in order today because student loan relief has a definite end date.
Student loans could be fixed by February
There have been several proposals to improve student loans from Democrats and Republicans. By February, the U.S. Department of Education will work to improve student loans, including student loan repayment, student loan forgiveness, and student loan forgiveness. This may include simplifying student loan repayment, ensuring that more student borrowers are eligible for the public service loan forgiveness program, and targeted student loan forgiveness. The Department of Education can also strengthen standards and oversight of student loan servicers to ensure student borrowers receive fair treatment. Although the Ministry of Education is not resolving all student loan issues, the Ministry of Education has six months to make progress to increase transparency, reduce bureaucracy and help borrowers students navigate a complex system of student loans.
Student borrowers will receive $110 billion in student loan forgiveness
Here’s a shocking statistic: Through January 31, 2022, student borrowers will have received over $110 billion in student loan forgiveness. It’s not a typo. The Department of Education says that since March 2020, student borrowers have saved $5 billion a month from student loan relief due to the Covid-19 pandemic. With no mandatory payments on federal student loans and temporary 0% interest rates on federal student loans, student borrowers saved $110 billion. Although student loan forgiveness stems from interest and not from a reduction in the principal balance of the student loan, it is still full-scale student loan forgiveness. The amount may be less than the $50,000 in student loan forgiveness that Sen. Elizabeth Warren (D-MA) and Senate Majority Leader Chuck Schumer (D-NY) have lobbied for. However, student borrowers will have enjoyed 22 months of no new interest or federal student loan repayments. In addition, all of their non-payments have been counted for the purposes of the Civil Service Loan Forgiveness Program and the Forgiveness of Student Loans linked to Income Oriented Repayment Plans.
Private student debt won’t get the same student loan relief
At the start of the Covid-19 pandemic, several states helped student borrowers obtain student loan relief for their private loans. Similarly, some lenders have helped increase student loan relief for their student borrowers. However, the federal government has focused its student loan relief only on federal borrowers. Why? The federal government owns 92% of all outstanding student loans, so Congress has focused here. In contrast, private loans belong to lenders, financial institutions, investors, and other third parties. Therefore, unlike federal student loans, it is more complex to negotiate student loan relief for private student debt with each of these parties, and will continue to be. As a result, private student debt has been largely excluded from federal student loan relief. Sen. Bernie Sanders (I-VT) has proposed canceling all private and federal student loans, though his proposal has not gained traction in Congress. For student borrowers with private student debt who have struggled financially during the Covid-19 pandemic, options have been limited. These student borrowers have asked for a reprieve from their student loan officer or have turned to bankruptcy as a last ditch effort to pay off their student loans.
Don’t Expect Student Loan Forgiveness
Many student borrowers now assume that student loan forgiveness will happen soon. Why? Well, they believe this extension of student loan relief is a precursor to large-scale student loan forgiveness. For example, student loan forgiveness became the focus of Capitol Hill last week. Progressives in Congress will continue to pressure Biden to cancel student loans. Since becoming president, Biden has forgiven $3 billion in student loan debt. This includes $1.5 billion in student loans, which he canceled in this way. Perhaps Biden will then enact large-scale student loan forgiveness. However, there is no evidence that the extension of student loan relief is linked in any way to the large-scale cancellation of student loans. For example, Biden could have extended student loan relief to appease progressives and give enough time to 10 million student borrowers to get a new student loan manager after the planned departure of two top student loan managers. Therefore, targeted cancellation of student loans, for example through the repayment defense rule, will continue to occur. Large-scale student loan forgiveness could happen, but don’t expect it to be guaranteed with the stroke of a pen.
A lot can happen with your student loans between now and February. Reduce your uncertainty by taking control of your student loans. Here are some popular options for saving money with student loan repayment: