Are you struggling with student loan debt? If so, there’s some good news. The federal government has temporarily suspended student loan payments, known as the student loan pause. This means that until September 30, 2021, you won’t have to make any payments on your federal student loans, and interest rates will be set to 0%. This provides much-needed relief for borrowers facing financial hardship due to the pandemic.

It’s important to note that this Pause only applies to federal student loans and does not affect private student loans or Pell Grants. While using this time as a “grace period” may be tempting, you must continue paying to reduce your overall debt.

So how does the student loan pause work? What do you need to know about student loan servicing during this time? We’ll answer these questions and more in the following sections.

Critical Dates for the End of Student Loan Pause

The deadline for the Student Loan Pause is September 30, 2021

The student loan pause has been a much-needed relief for borrowers who have struggled to make payments during the pandemic. However, this Pause will come to an end soon. The deadline for the student loan pause is September 30, 2021.

The Student Loan Pause was Extended Until September 30, 2021

Initially set to expire on January 31, 2021, the student loan pause was extended until September 30, 2021. This extension gave borrowers additional time to focus on their finances and return to their feet after the pandemic’s economic impact.

Borrowers Will Need to Resume Payments on October 1, 2021

If the student loan pause is not extended beyond September 30, borrowers must resume payments starting October 1, 2021. This means borrowers must be prepared to begin making regular monthly payments towards their student loans again.

It’s important to note that even though the deadline for resuming payments is October 1, it may take some time for servicers and lenders to process payment plans and update account information. Therefore, borrowers should contact their servicers as early as possible before resuming payments.

Other Key Dates Throughout the Year

  • March: President Biden signed an executive order extending the federal student loan payment freeze through September.

  • June: The Department of Education announced they would begin notifying borrowers when to expect their first bill in August.

  • August: The Department of Education sent notices reminding people about upcoming payments and offering assistance options.

What to Expect When the Student Loan Pause Ends

Student Loan Payments Will Resume After the Pause Ends

The student loan pause, which began in March 2020, has relieved millions of borrowers struggling financially due to the COVID-19 pandemic. However, this Pause is ending soon, and borrowers need to know they will have to start making payments again on their loans.

Borrowers Will Need to Start Making Payments Again on Their Loans

When the student loan pause ends, borrowers must resume making their monthly payments. This means that if you had automatic payments set up before the Pause, those payments would start again automatically. If you are making manual payments, you’ll need to log in and make a payment as usual.

Interest Rates May Have Increased During the Pause, Leading to Higher Payments

During the student loan pause, interest rates on federal loans were set at 0%, meaning no interest was accruing on those loans. However, private lenders may have continued charging interest during this time. After the Pause ends, interest rates may increase from where they were when you first took out your loan. This could lead to higher monthly payments than you were paying before.

Borrowers must prepare for these increased costs by reviewing their budgets and finding ways to reduce expenses or increase income.

Collections Efforts Against Borrowers in Default Will Start After the Student Loan Pause Ends

If you are currently in default on your student loans, collections efforts may have been paused during the student loan pause. However, when it ends, those efforts will resume as well. This could include wage garnishment or seizure of tax refunds.

If you’re struggling with your student loan payments and are at risk of defaulting or falling behind once the Pause ends, options such as income-driven repayment plans or deferment/forbearance are available.

Next Steps for Student Loan Borrowers as Payment Pause Ends

Prepare for the End of the Payment Pause

The student loan payment pause, which began in March 2020 due to the pandemic, is set to end in October 2021. As a student loan borrower, it’s essential to prepare for the end of this relief period and consider your repayment options.

Repayment Plans Available

Repayment plans are available if you cannot afford monthly payments after the Pause ends. These plans can make your payments more manageable by extending the term or capping your monthly payment at a percentage of your income.

Forbearance or Deferment Options

If you’re experiencing financial hardship and cannot make payments after the Pause ends, forbearance or deferment may be an option. Forbearance allows you to temporarily stop making or reducing costs, while deferment lets you postpone payments altogether.

Income-Driven Repayment Plans

Income-driven repayment plans are ideal if you qualify based on your discretionary income. These plans calculate your monthly payment based on how much money you earn and can result in lower monthly payments.

Plan Accordingly for the First Payment

Remember that your first payment will be due in October 2021, so it’s crucial to plan. Ensure you have yet to set aside to cover this expense and future costs.

How to Apply for Student Loan Pause

Contact Your Loan Servicer

The first step in applying for a student loan pause is to contact your loan servicer. You can find out who your loan servicer is by logging into the Federal Student Aid website, checking your most recent billiCall, or emailing them on the statement. Email them once you have their consent to request a student loan pause.

Submit a Request Online or by Phone

Most loan servicers allow borrowers to submit a request for a student loan pause online or by phone. If you prefer to do it online, log into your account on the loan servicer’s website and look for the option to request forbearance or deferment. If you would rather speak with someone directly, call the customer service number provided by your loan servicer and explain that you want to apply for a student loan pause.

Provide Documentation

Depending on why you are requesting a student loan pause, you may be required to provide documentation to support your request. For example, if you are experiencing economic hardship due to COVID-19, you may need to provide proof of job loss or reduced income. Ensure you understand the required documentation and submit it as soon as possible so there are no delays in processing your request.

Understand the Impact on Your Loan

While interest will not accrue during a student loan pause, it’s essential to understand that pausing your payments may extend the life of your loan. This means that even though you won’t make payments during this time, once the pause period ends, you will still owe the same amount plus any interest accrued before the Pause began. Before agreeing to a student loan pause, ask your servicer how this will impact your repayment schedule.

Other Biden student loan forgiveness programs still available

Federal student loan borrowers can still benefit from other Biden student loan forgiveness programs.

While the Pause on federal student loan payments has been extended until January 2022, many borrowers may wonder what other options are available for them beyond this period. The good news is that actual student loan borrowers can still use it.

One such several other Biden student loan forgiveness programs program is the Fresh Start program proposed by President Biden, which aims to help many borrowers with federal loans. This pro relieves those struggling with their debt and makes it easier to manage their finances. The details of this program are yet to be finalized, but it is expected to provide a fresh start for millions of Americans burdened with federal student loans.

The Biden administration has proposed a Fresh Start program to help many borrowers with federal loans.

The Fresh Start program will offer a one-time payment of $10,000 towards the principal balance of eligible federal loans. Borrowers who have been delinquent on their prices or defaulted for at least nine months will qualify for this relief. This means that millions could receive significant debt reduction under this plan.

In addition to the Fresh Start program, Education Secretary Miguel Cardona has supported other student loan forgiveness initiatives under the Harris administration. These include expanding Public Service Loan Forgiveness (PSLF) and revising Income-Driven Repayment (IDR) plans. PSLF allows public service workers such as teachers and nurses to have their remaining balances forgiven after ten years of qualifying payments; IDR plans cap monthly payments at a percentage of discretionary income and forgive any remaining balance after twenty or twenty-five years, depending on the plan.

Current status of loan forgiveness plan

Uncertainty due to the ongoing pandemic

The current status of the loan forgiveness plan is still being determined due to the ongoing pandemic. The Biden administration has proposed a $10,000 student loan forgiveness plan, but it has yet to be implemented. There is no guarantee that this proposal will pass Congress.

Challenges for borrowers enrolled in Public Service Loan Forgiveness program

Borrowers enrolled in the Public Service Loan Forgiveness (PSLF) program may need help meeting the requirements. Budget cuts and layoffs have affected Many public service jobs and releases, making it difficult for borrowers to maintain employment and qualify for loan forgiveness.

Repaye plan as a debt relief option for high loan balances

The Repaye (Revised Pay As You Earn) plan can provide debt relief for borrowers with high loan balances. This plan calculates monthly payments based on a percentage of your income and forgives any remaining balance after 20 or 25 years of payments. However, while this may be a good option for some borrowers, there may be better choices for some.

A careful review of terms and conditions before enrolling in repayment plans and forgiveness programs

Loan servicers may offer various repayment plans and forgiveness programs, but borrowers should carefully review the terms and conditions before enrolling. Some plans may result in higher overall costs or more extended repayment periods than others.

Pros of Student Loan Pause

Temporary Relief for Struggling Borrowers

The student loan pause has provided much-needed relief to borrowers struggling to make payments during the COVID-19 pandemic. The Pause, implemented in March 2020 and extended several times, allows borrowers to temporarily stop paying federal student loans without accruing interest or facing late fees.

This temporary relief has been incredibly beneficial for those who have lost their jobs or experienced reduced income due to the pandemic. Without the Pause, many borrowers would have been forced to choose between paying their student loans and covering other essential expenses like rent and groceries.

Interest Rates Set to 0%, Saving Borrowers Money

Another significant advantage of the student loan pause is that interest rates on federal student loans are temporarily set to 0%. This means borrowers are not accruing any additional interest during the pause period, saving them money in the long run.

For example, suppose a borrower had a $30,000 federal student loan with an interest rate of 6% before the Pause. In one year, they would accrue $1,800 in interest alone. However, with the interest rate set at 0% during the pause period, they can save this amount and put it towards other essential expenses.

Prevent Default and Damage to Credit Scores

The student loan pause can also help prevent default and damage to credit scores. When borrowers cannot pay their student loans and fall behind, they risk defaulting. Defaulting can lead to wage garnishment, tax refund seizure, and even legal action taken against them by debt collectors.

Defaulting on a loan can also severely damage a borrower’s credit score. Late payments remain on credit reports for seven years, negatively impacting creditworthiness when applying for future loans or credit cards.

By pausing payments during this challenging time, borrowers can avoid defaulting on their loans and protect their credit scores.

Cons of Student Loan Pause

Delayed Payments, Not Cancellation

One of the most significant cons of a student loan pause is that it only delays payments and does not cancel your debt. While it can temporarily relieve those struggling to make payments, it is not a long-term solution. Borrowers will still be responsible for paying back their loans eventually, with interest.

Accruing Interest During the Pause

Another drawback of pausing student loan payments is that interest may continue to accrue during the pause period. This means that borrowers may owe more money in the long run as the total amount owed increases due to interest charges.

Extended Repayment Periods

Pausing student loan payments can also result in an extended repayment period. When borrowers resume making payments after the pause period ends, they may need to pay more interest over time because of the longer repayment term. This can make it harder for borrowers to get out of their debt and lead to additional financial stress.

Temporary Relief Only

While a student loan pause can temporarily relieve those struggling with debt, it is not a long-term solution. Once the pause period ends, borrowers will still be responsible for repaying their loans and dealing with any accrued interest charges. Considering other options for managing student loan debt and pausing payments is essential.

Negative Impact on Credit Scores

Finally, pausing student loan payments may negatively impact credit scores and make it harder to qualify for loans or credit in the future. Late or missed payments can significantly impact credit scores and borrowing ability. While a student loan pause may seem like an attractive option in the short term, it’s essential to consider the potential long-term consequences before deciding whether or not to pursue this option.

Is Student Loan Pause Right for You?

Consider Your Financial Situation Before Deciding on a Student Loan Pause

Pausing your student loan payments may seem attractive, especially if you struggle to meet ends. However, looking at your financial situation is essential. Determine whether breaking your student loan payments will provide the relief you need or if it will only delay the inevitable.

If you have other debts with higher interest rates or pressing bills that must be paid, it may be better to focus on those first. Alternatively, continuing regular payments might be more beneficial in the long run if you have enough funds to keep paying off your loans without compromising your basic needs.

Understand the Potential Consequences of Pausing Your Student Loan Payments

Before deciding on a student loan pause, it is essential to understand the potential consequences associated with this course of action. First and foremost, interest continues to accrue during the forbearance period; when payments resume, there could be a significant increase in the total amount owed.

Pausing student loan payments can negatively impact your credit score and lead to penalties and fees. It is also worth noting that some lenders may not allow borrowers who paused their loans access specific repayment plans or benefits.

Explore Alternative Options Before Pausing Your Student Loan Payments

Pausing your student loan payments should only be considered the ultimate solution for some borrowers’ financial struggles. There are various alternative options available that can help you manage your debt without putting everything on hold.

For instance, income-driven repayment plans allow borrowers to adjust their monthly payments based on their income level and family size. Refinancing is another option where borrowers can replace their existing loans with new ones with lower interest rates and better terms.

Exploring all possible alternatives before deciding to pause your student loan payments is crucial.

Final Thoughts on Student Loan Pause

What is the status of the student loan pause?

The student loan pause, which has been in effect since March 2020 due to the COVID-19 pandemic, is set to expire on January 31, 2022. Federal student loan borrowers must resume their payments on February 1, 2022. However, several factors could affect the future of the student loan pause.

Debt Ceiling Bill May Affect the Student Loan Pause.

One factor is the debt ceiling bill currently being debated in Congress. If Congress fails to raise or suspend the debt ceiling by October 18, 2021, it could have significant consequences for government funding and operations. It could also impact the ability of the Department of Education to continue pausing federal student loan payments.

Interest Rates on Student Loans may Increase after the Pause Ends.

Another factor to consider is that interest rates on federal student loans are set to increase after the Pause ends. This means borrowers who resume their payments in February could see higher monthly payments than before the Pause began.

Student Loan Cancellation is not guaranteed even with the Pause.

Borrowers need to remember that while they may have had a break from making payments during this time, it does not guarantee any forgiveness or cancellation of their student loans. The Biden administration has proposed cancelling up to $10,000 per borrower in federal student loan debt but has faced opposition from some members of Congress.

Supreme Court Rules Do not Directly Impact Student Loan Pause.

Recent rulings by the Supreme Court regarding vaccine mandates and abortion rights do not directly impact the student loan pause. While these decisions may have broader implications for government policies and regulations, they do not change how federal student loans are managed or regulated.

Why Can Biden Not Extend Student Loan Pause Again?

Resources for Further Assistance

In conclusion, the student loan pause is set to end on September 30, 2021. As this date approaches, it is essential to understand what will happen to your student loan payments and consider if the Pause is right for you. There are several resources available to help guide you through this process.

Many resources are available online if you have questions about the end of the student loan pause or need guidance on applying for it. There are still other Biden student loan forgiveness programs available that may be worth exploring.

While there are pros and cons to the student loan pause, ultimately, deciding whether it is right for you depends on your circumstances. It is essential to weigh all factors before making a decision.

Overall, if you need assistance with your student loans, do not hesitate to seek help from experts in the field. You can make informed decisions about your finances and future with careful consideration and proper guidance.

FAQs

Q: What happens if I don’t resume my student loan payments after the Pause ends?

A: If you do not resume your payments after the Pause ends, your account may become delinquent or default, negatively impacting your credit score.

Q: Can I still apply for a student loan pause after September 30?

A: No, once the deadline has passed, you can no longer apply for a student loan pause.

Q: Will interest continue to accrue during the student loan pause?

A: No, interest and payments have been paused during this period.

Q: How do I know if I qualify for Biden’s other student loan forgiveness programs?

A: You can check eligibility requirements online or speak with a financial advisor specializing in student loans.

Q: Should I consolidate my loans before resuming payments?

Consolidating your loans may be a good option if you have multiple federal loans with varying interest rates and monthly payments.