In response to the economic hardship created by the coronavirus pandemic, the U.S. government suspended payments and interest on student loans starting in March 2020. Now that vaccine distribution in the U.S. is widespread and businesses have been reopening, many have wondered just how long the student loan forgiveness program would continue. The Biden administration answered that question in August 2021, announcing a final extension of the student loan pause. Here are the details about what this means for those with student loans.
What Exactly Is Suspended During This Student Loan Extension?
The Coronavirus Aid, Relief and Economic Security Act, or CARES Act, suspended federal student loan payments and interest. The act also prevented collection actions on defaulted loans and negative credit reporting. The Biden administration extension continued the suspension of payments, interest and collections.
How Long Will This Loan Suspension Last?
The original March 2020 suspension has been continually extended. In August 2021, the Biden administration extended the most recent expiration date from September 2021 to Jan. 31, 2022.
Why Was Another Extension Granted?
The supposedly definitive end to the extension is meant to give a concrete date that both borrowers and lenders can use to plan for the resumption of payments. It’s also intended to reduce the risk of delinquency and defaults. The Biden administration believes that even though the economy is recovering, millions of Americans still face hardship from the coronavirus pandemic, and this final extension will give those taxpayers some additional time to get back on their feet.
Is This the Final Student Loan Payment Extension?
According to the Biden administration’s Aug. 6 announcement, this will be the final student loan payment extension. While this may very well be the administration’s intention, Jan. 31, 2022, is still a long time away. If the economy continues to improve and businesses remain open, you can expect this to be the final extension. However, if the Delta variant continues to pick up steam and cases skyrocket over the winter, the Biden administration may revisit this policy.
Should I Continue Paying Even Though I’m Not Required To?
If you haven’t returned to work and your cash flow remains tight, then it’s probably in your best interest to take advantage of the student loan payment extension and hoard as much cash as you can. However, if your life has more or less returned to normal, you might consider continuing your student loan payments. As no interest is currently accruing on your loan, the payments you make will go directly toward your principal balance, which will greatly reduce the cost of your loan over the long run.
Does This Extension Apply to Private Student Loans?
Unfortunately, the moratorium on student loan payments only applies to federal student loans. If you’re dealing with a private lender, you’re still responsible for payments and interest. If you’re not in a position to make timely payments, reach out to your lender to see if you can negotiate some type of payment suspension. Otherwise, you’re at risk of damaging your credit report if you fall behind on your payments.
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Last updated: Sept. 10, 2021
This article originally appeared on GOBankingRates.com: Student Loan Forgiveness Extended to January 2022: What You Should Know