If you have federally held student loans, you’re getting a break on making payments — again.
The freeze on interest rates and payments for federally held student loans — aka administrative forbearance — has been extended by the Department of Education through April 30, 2022. Millions of Americans were staring at the resumption of payments on Feb. 1, until the latest extension was announced by President Joe Biden just before Christmas. Payments will now resume on May 1.
For those keeping score, this is the fourth time the deadline for student loan forbearance has been extended. Millions of those owing money have not paid on their loans in nearly two years, since the pandemic began in March 2020.
The 90-day extension is largely attributed to the surge in COVID-19 cases driven by the Omicron variant. During the nearly two-year pause in payments and interest, several automatic student loan forgiveness programs have been initiated. They have given relief to nearly 500,000 people, including active military personnel and veterans, people working in the public sector and those with qualifying disabilities.
According to the Education Data Initiative, about 42.9 million Americans owe $1.57 trillion in federal student loans.
Here’s what you need to know about student loan forbearance.
What Is Student Loan Administrative Forbearance?
The pause on payments and interest accrual is an extension of the administrative forbearance that originated with the Coronavirus Aid, Relief, and Economic Security Act — aka the CARES Act — passed in March 2020 to address economic issues due to COVID-19.
Directed by the emergency legislation, the Department of Education initially announced that all federally held student loans would be placed in administrative forbearance through Sept. 30, 2020. Interest rates were automatically set to 0% and all payments were suspended.
Then-President Donald Trump later signed an executive order to extend the administrative forbearance period until Dec. 31, 2020, and the Secretary of Education extended those measures until Jan. 31, 2021.
On his first day in office, President Joe Biden signed an executive order directing the Education Department to extend its freeze on interest rates and payments for federally held student loans through Sept. 30, 2021.
And on Aug. 6, the Department of Education extended the forbearance again — this time until Jan. 31, 2022. Now, another extension through the end of April 2022.
What Loans Does Payment Pause Cover?
The interest waiver covers all loans owned by the U.S. Department of Education, which includes Direct Loans, subsidized and unsubsidized Stafford loans, Parent and Graduate Plus loans and consolidation loans.
If you happen to have Federal Family Education Loans (FFEL) and Perkins loans held by the federal government, they’re covered, too. But the vast majority of those loans are commercially held, which makes them ineligible for the benefit.
What Does This Mean for My Student Loans?
There are four things to know about how administrative forbearance affects student loans until May 2022:
- It suspends loan payments.
- It stops collections on defaulted loans.
- It sets the interest rates to 0%.
- Each month of the suspension will count as a payment for the purpose of a loan forgiveness program.
Note that the suspension does not mean that the federal government is making your student loan payments for you — you’ll just be free of making loan payments without accruing interest or incurring late fees while the pause is in effect.
The latest extension begs the question of how long student loans could remain in forbearance and whether this could eventually lead to the cancellation of student loans. That remains to be seen, but until then, here are five ways to know if you can benefit from the forbearance period.
Also, if you are able, it would be smart to put away money for when the moratorium on payments is finally lifted. We have some ideas on how you can use the forgiveness extension to your advantage.
Tiffany Wendeln Connors is a staff writer/editor at The Penny Hoarder. Read her bio and other work here, then catch her on Twitter @TiffanyWendeln.