Since March 2020, federal student loan payments have been on pause — with no payments required, no interest charged and all collections activities on hold. However, this period of administrative forbearance is set to expire on Aug. 31, 2022, meaning all payments will resume on Sept. 1.
The U.S. Department of Education has extended the payment pause multiple times. Previously, the forbearance period was set to end on May 1, but the department stated in a press release that a “responsible phase-down of pandemic relief” prompted an extension of the period for an additional four months.
Payments resume on Sept. 1, 2022
Millions of borrowers are currently taking advantage of the administrative forbearance period initiated by the CARES Act in March 2020. Eligible loans include all federally held student loans, plus privately held FFEL loans that are in default.
With the forbearance period set to expire on Aug. 31, borrowers who have not been making payments need to prepare to resume paying their balances. The Department of Education has said that borrowers can expect information and resources about resuming payments leading up to this date and will receive a billing statement at least 21 days before the first payment is due.
In the meantime, you can visit the Federal Student Aid website and your loan servicer’s website to ensure that your contact details are up to date so that you’re informed when payments are set to resume.
Why was the student loan payment pause extended?
The payment pause has been extended a number of times, with the most recent extension announced in April 2022. The Biden administration has stated that this extension of the payment pause was necessary to give borrowers and servicers additional time to plan for the resumption of payments.
“During the pause, we will continue our preparations to give borrowers a fresh start and to ensure that all borrowers have access to repayment plans that meet their financial situations and needs,” said Education Secretary Miguel Cardona. To ensure this promise, the department announced that federal borrowers with defaulted loans or delinquent payments will be in good standing when repayment restarts.
What to do if you can’t afford student loans after payments resume
A Bankrate survey from April 2022 found that 74 percent of U.S. adults with federal student loans predicted that an extension of the student loan forbearance period would have a positive impact on their finances. With these additional months to prepare for repayment, borrowers have more time to create a plan for their student loans and potentially explore more relief options.
The current administrative forbearance period is automatically granted to all federal student loan borrowers. However, the federal government also offers general forbearance outside of this emergency relief. You may qualify for up to 12 months of forbearance at a time (up to three years total) if you are unable to pay your loans due to financial difficulties, medical expenses or changes in employment. For more details, you can contact your loan servicer.
Income-driven repayment plans
Income-driven repayment plans set your monthly payment based on a percentage of your discretionary income. Typically you’ll make between 20 and 25 years of eligible payments, and then the rest of your balance will be discharged. If your income is low enough, your payments could drop to $0. If you’re interested in applying, contact your loan servicer to see which plan best suits your needs.
Loan forgiveness options
Borrowers working in certain occupations may qualify for federal programs that forgive student loan balances after a number of years. For example, the Public Service Loan Forgiveness (PSLF) program – which has loosened some of its eligibility requirements through Oct. 31, 2022 – forgives loans for people in eligible public service jobs after 10 years of payments on an income-driven repayment plan. Teacher Loan Forgiveness, on the other hand, requires five years of employment as a teacher in a high-need area in exchange for up to $17,500 in federal debt discharged.
While refinancing federal student loans will eliminate the options listed above, it could be a viable option if you took out your federal loan when interest rates were high. Private student loan lenders are currently offering extremely low interest rates, so refinancing into a different rate or term could help you lower your monthly payment.