Student loan payments are due in less than 50 days
After five extensions on federal student loan forbearance, borrowers will have to resume payments come . The freeze on student loans will have lasted nearly two years by then; it began in under the CARES Act when the pandemic first shook the economy.
The freeze gave federal student loan borrowers the choice to continue to pay off their debt in order to cover other necessary expenses during the pandemic. Democrats including Senate Majority Leader Chuck Schumer, Rep. Alexandria Ocasio-Cortez, Sen. Elizabeth Warren, and Rep. Ayanna Pressley have continually pushed for President Joe Biden to extend the forbearance period.
“We are calling on the administration to continue that pause with the advent of Omicron, the continuation of COVID,” Schumer said during a Dec. 6 press conference. “Students should not have to have this burden placed on their shoulders.”
In early August, the freeze on federal student loan payments was pushed back until . Biden, White House officials, and the Education Department said that it would be the final extension, however. Biden’s press secretary Jen Psaki on Monday confirmed that there won’t be any additional extensions on student loan forbearance, and that payments will resume in February.
“We’re still assessing the impact of the Omicron variant, but a smooth transition back into repayment is a high priority for the administration,” she said during a press conference. “The Department of Education is already communicating with borrowers to help them to prepare for return to repayment on February 1.”
How borrowers should prepare for repayment
Student loan experts and companies that work with federal student loan borrowers emphasize the importance of taking the time to prepare for repayment before February.
Rob Scheinerman, CEO of AIG Retirement Services, tells Fortune that borrowers should review their monthly budgets because their finances “may need a reset.”
“A partner may have lost a job or reduced hours. A loved one may have returned home,” he says. “You haven’t had student loan payments as part of your budget for almost two years, and they can be a major source of financial stress.”
Scheinerman also points out that some borrowers will be making their first-ever student loan payment, even though they’re more than a year into their careers. If you find yourself in that position, he suggests taking time to confirm information with the Federal Student Aid office and your student loan servicer ahead of repayment. Some employers may also offer assistance.
“More and more employers are providing student loan information programs for their employees,” he says. “If your employer has a student loan information program, then take advantage of this perk because you don’t want to make a mistake on the details.”
Sounds like the freeze won’t get extended. What about student loan forgiveness?
In 2021, the Biden administration and Education Department canceled about $11 billion in debt; some federal student loan servicers ended their contracts; and a major overhaul of the Public Service Loan Forgiveness (PSLF) program came to fruition.
On the campaign trail, Biden touted a policy that would cancel up to $10,000 in federal student loan debt per borrower—but his tune has changed while in office. He’s not keen on the idea of mass forgiveness, and debt cancellation has gone to very targeted groups of borrowers: students who attended now-defunct institutions, those people with total and permanent disabilities, and public service workers.
Student loan experts tend to agree that Biden’s student loan forgiveness tactics will follow his established pattern: targeted debt cancellations.
“The Biden administration has a real track record now that we can look to and know how it thinks about awarding student loan relief,” Andrew Pentis, a certified student loan counselor with Student Loan Hero, previously told Fortune. “It’s been a track record of targeted relief to specific borrowers—not the mass forgiveness proposals that many progressives have called for.”
For that reason, Leslie Tayne, the founder and managing director of Tayne Law Group, says borrowers shouldn’t hold out on making payments or get their hopes up that their debt could potentially be canceled.
“I wouldn’t count on” mass student loan forgiveness, Tayne, a debt relief attorney, previously told Fortune. “The realities of the situation are that you have student loans, you borrowed money, and you have an obligation to pay it back.”
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