The Biden administration extended the pause on federal direct student loan payments and interest through 8/31/22. Previously expected to resume in May 2022, this marks the 6th extension of the pause originally started back in October 2020 by the Trump administration. I don’t expect this to be the final extension, either.
While previous extensions were called the “final one”, I saw no such language with the announcement this time. The likely reason August was chosen is so that another announcement regarding student loans can be made closer to mid-terms with hopes of some renewed political lift. It would make little sense to politically to intentionally choose payments to resume right before mid-term elections. Of course, this just my best guess at making sense of what is going on in the student loan world and nothing is official until announced.
What does this mean for student loan borrowers?
- The pause continues to only apply to federal direct student loans. If you have private student loans, you are still required to make payments.
- If you are working towards PSLF
- The months that you are not required to make payments under the pause continue to count towards PSLF.
- The extension will decrease your total student loan costs and increase the amount that will be forgiven after your required 120 qualifying payments are made.
- Now is a good time to verify your loans with FedLoan are on track and all qualifying payments are properly counted.
- If you are not working towards PSLF
- If your employer qualifies you for PSLF and you haven’t previously applied, now is the time to analyze if it makes sense to do so. Under the limited PSLF waiver, your past payments made while working for a qualifying employer may now qualify but you need to apply by 10/31/22.
- Prepare for the worst and hope for the best. Be financially ready to begin making your monthly student loan payments now if you needed to.
- You potentially may not be required to make payments towards federal direct student loans in 2022.
- If there is no chance you will qualify for PSLF, consider a private student loan refinance between now and when student loan payments resume.
- FFEL Loan borrowers
- You are still required to make monthly payments unless you complete a Direct Loan Consolidation.
- FFEL loans do not qualify for PSLF unless you do a Direct Loan Consolidation prior to 10/31/22 under the PSLF limited waiver.
For young borrowers with significant debt, a solid student loan plan can be the most important piece of your finances. It’s a shame the student loan environment can be so confusing and contains so much uncertainty. I speak with highly educated borrowers every day that have difficulty making sense what to do with their student loans. You’re not alone if that is you. Let me know if you have any questions – I’m here to help.