Q: Will Biden grant another student loan forbearance extension?

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President Joe Biden may extend the student loan forbearance when it expires on September 31, 2021. Education Secretary Miguel Cardona recently said that Biden will look at the data before extending the payment pause. That data will likely include data related to how the economy has bounced back from the pandemic and COVID-19 emergency relief measures.

Student loans covered by the forbearance period

Federal student loans directly owned by the U.S. Department of Education are covered by the forbearance period. Those loans include:

  • Direct Consolidation Loans
  • Direct Subsidized Loans
  • Direct Unsubsidized Loans
  • Direct Parent Plus Loans

However, neither Federal Perkins Loans nor private student loans are covered by the forbearance.

Contact your student loan servicer or private lender to see if your loans are covered by the mandatory administrative forbearance.

FFEL Program Loans

Federal Family Education Loans in (a) good standing and (b) owned by a guaranty agency are not covered by the federal student loan forbearance.

But FFEL Program Loans in default are covered. FFEL Loans owned by the Department of Education are also covered.

There are two options to check to see if your FFEL Loans are covered by the freeze:

  • Contact your student loan servicer
  • Check the Federal Student Aid website, studentaid.gov

Why aren't FFELP Loans suspended?

When President Donald Trump signed the executive order suspending student loan payments, the order applied only to student loan debt directly owned by the Department of Education (ED). The same was true of the CARES Act.

Loans made under the Federal Family Education Loan Program are federal student loans. But most FFELP Loans aren't owned by ED. Instead, they are owned by guaranty agencies like Ascendium, ECMC, MOHELA, Trellis, etc.

Should I consolidate my FFEL loans to Direct Loans?

You should consolidate your FFEL loans into a Direct Loan if you work in public service and want loan forgiveness. Only Direct Loans qualify for the PSLF Program.

You should also consider consolidating your FFEL Loans to a Direct Loan if you want to:

  • qualify for suspended payments under the student loan freeze or
  • qualify for potential loan forgiveness offered by the Biden Administration

Unlike private lenders who check your credit score when you apply to refinance your loans, the Department of Education will not check your credit score when applying for a Federal Direct Consolidation Loan.

Student loan freeze timeline

  • On March 27, 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The CARES Act suspended payments on most federal student loans via deferment/forbearance through September 2020. It also temporarily set the federal student loan interest rate to 0%. And it suspended student loan wage garnishment and tax refund offset.
  • On August 8, President Donald Trump signed a memorandum ordering former Secretary of Education Betsy DeVos to extend student loan relief policies included in the CARES Act through the end of December.
  • On August 21, 2020, DeVos implemented the policies. Student loan borrowers got three more months of relief.
  • On December 4, 2020, the Trump Administration extended the relief measures through January 31, 2021.
  • On January 20, 2021, on his first day in office, President Biden extended the pause on federal student loan payments through September 30, 2021.
  • On March 11, 2021, President Biden signed the American Rescue Plan Act. The Act makes any student loan forgiveness tax-free until December 31, 2025.
  • On March 30, 2021, the White House expanded the freeze to cover defaulted Federal Family Education Loans. The expansion also directed the return of wages garnished, and tax refunds offset for defaulted FFEL Loans.

Student loan freeze benefits

Most federal student loan borrowers are receiving some or all of the following benefits:

  • Interest waiver
  • Payment suspension
  • Credit towards loan forgiveness programs, Public Service Loan Forgiveness (PSLF), and IDR forgiveness (PAYE, REPAYE, and IBR)
  • Suspension of student loan wage garnishment, tax refund, and Social Security benefit offset

How to prepare for the end of the federal student loan forbearance

When the federal student loan forbearance ends in September, your interest rate will return to normal, and your first monthly payment will be due in November/December.

Contact your loan servicer to find out what your new monthly payment amount will be at that time.

If you need a lower payment, look into an income-driven repayment plan:

  • Pay As You Earn (PAYE)
  • Revised Pay As You Earn (REPAYE)
  • Income-Based Repayment (IBR)

An IDR plan will give you a monthly payment based on your adjusted gross income, family size, and loan balance.

You should also check to make sure you've gotten full credit towards student loan forgiveness programs like PSLF and IDR forgiveness.

If you were in good standing when the freeze started in March last year, you should have around 19 months of credit.

Defaulted federal loans

The federal government and its debt collection agencies will likely resume student loan collections (wage garnishments and tax refund offset) when the freeze ends in October. Look into applying for a Direct Consolidation Loan or entering the student loan rehabilitation program to get out of default before the forbearance ends.

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