If you’ve held federal student loans, you will be given another pause on payments.
On his first day in office, President Joe Biden signed an executive order directing the education department to extend the freeze on interest rates and payments on government-held student loans until September 30, 2021.
Here’s what you need to know:
What is Administrative Forbearance on Student Loans?
The pause in payments and accrued interest is an extension of the administrative forbearance brought about by the Coronavirus Aid, Aid and Economic Security Act – also known as the CARES Act – passed in March 2020 to address economic problems arising from COVID-19 .
Led by emergency laws, the Department of Education announced that all student loans held by the federal government would be in administrative leniency by September 30, 2020. The interest rates were automatically set to 0% and all payments were suspended.
Then-President Donald Trump later signed an executive order extending the administrative grace period to December 31, 2020, and the Secretary of Education extended those measures to January 31, 2021.
Biden led the extension yesterday amid a spate of executive orders he signed on his first day in office.
What loans does this legislation cover?
The interest waiver covers all U.S. Department of Education loans, including direct loans, subsidized and unsubsidized Stafford loans, parenting and graduate loans, and consolidation loans.
If you happen to hold federal family education loans (FFEL) and Perkins loans from the federal government, those are also covered. However, the vast majority of these loans are held commercially, which is why they are not eligible for the benefit.
What does this legislation mean for my student loans?
There are four things to know about how Administrative Forbearance will affect student loans through September 30, 2021:
- Loan payments are suspended.
- It stops collections for defaulted loans.
- It sets the interest rates to 0%.
- Each month of suspension counts as payment for a lending program.
Note that the suspension does not mean that the federal government will make your student loan payments for you. You will only be unable to make loan payments for eight months without incurring interest or late fees.
Biden did not make thousands of dollars in student loans, despite some hopes in his first executive orders. This request has to go through Congress and meets with resistance – which means if Student loan balances will be permanently deleted, it will take a while.
Here are five ways to see if you can benefit from indulgence.
Tiffany Wendeln Connors is an associate and editor at The Penny Hoarder. Read her bio and other work here, then catch her on Twitter @TiffanyWendeln.