Biden administration extends federal student loan moratorium

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Last week, the Biden administration released what the Education Department calls “Final extension” of the federal student loan grace period… Borrowers will not have to resume payments on their federal loans until January 31, 2022. Until that time, federal loans will remain interest-free and non-payment penalties will not be tolerated.

This is the fourth time the moratorium has been extended. The initial rationale – that the pause in disbursements would help the 40 million federal borrowers who are already struggling to cope with various economic problems from the pandemic – was recently reinforced when two loan servicers, FedLoan Servicing and Granite State, announced that they would not renew their contracts with the federal government. The prospect of renewed payments as borrowers move to new services helped convince the administration to extend the moratorium.

As many of you know, FedLoan Servicing also administers a government service loan forgiveness program, which means moving to a new, as yet unidentified service agent is even more important for those of you planning to take advantage of this assistance option. The Department of Education has assured that the program will continue and that special care will be taken to ensure that records are passed on to the new PSLF Program Administrator without incident.

So what should a borrower do now? We advise you to do two things.

First, get ready to resume payments in February. Prepare a budget for February 2022 and beyond that includes the repayment of your student loan, making sure you are participating in the appropriate repayment plan. If you are not sure, contact our partner, Cambridge Credit Counseling… The advice is free, so take advantage.

Second, if you are a candidate for a government service loan forgiveness – even if you paid in just a few of the 120 years it took to provide assistance, contact FedLoan Servicing via PSLF appby ticking the box indicating that you just want to know where you are standing. This will allow you to document the number of related payments that you made before this program is transferred to the new service center.

Finally, keep the faith and keep federal loans at the federal level. Combining them with a private lender converts them into private loans, which means they won’t be eligible for PSLF, as well as any potential lump sum cancellation, be it $ 10,000 or $ 50,000, which many advocates have been pushing for. that the Biden administration could provide.

For more information and resources on student debt management visit studentloans.nysut.org



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