Student loan payments to restart for more than 40M people in US
WASHINGTON – For nearly two years, most student loan borrowers have been spared the obligation of making payments on their balances. Their interest rate has been frozen, and for the millions in default, the collection calls have stopped.
That officially ends in February. As President Joe Biden’s administration promised, the payment process will restart for 41 million Americans, White House press secretary Jen Psaki said during a news briefing. More details about how the restart will work will be released in the coming weeks, the Education Department said in a statement.
Some borrowers had hoped the pause on payments would be extended. There is precedent. President Donald Trump’s and Biden’s administrations had extended the moratorium weeks before payments were expected to resume. Wednesday, liberal Democrats asked Biden to issue another extension, citing the economy and uncertainty around the omicron variant of the COVID-19 virus, Politico reported.
The administration has long broadcast its plan to resume payments Feb. 1. “A smooth transition back into repayment remains a high priority for the Administration,” the Education Department said Wednesday.
While payments were paused, the nation’s $1.7 trillion student loan debt portfolio kept growing. Left-leaning lawmakers have pushed Biden to use his executive power to forgive student loan debt en masse. Critics of loan forgiveness say such a move would be a onetime solution and disproportionately benefit those with higher wages and loan balances.
Question: When do student loan payments resume?
Answer: That will vary from borrower to borrower, but many payments will resume in February. The Education Department said borrowers will receive some form of notice at least 21 days before their first payment is due. Borrowers can contact their loan servicer for the exact date their payments restart.
Those seeking relief from their student loan payments – for instance, because they don’t think they can afford them – will probably have to rely on one of the government’s income-based repayment programs. The federal government has started informing borrowers about the income-based repayment plans available to them.
In a statement, the Education Department said it was working with servicers to ensure they’re ready to help borrowers when payments restart.
Q: What will happen to interest rates?
A: During the pandemic pause on payments, the federal government set interest rates at 0% on student loans – leading some borrowers to pay down their loans aggressively. The standard rate is set to resume in February as well. Rates vary by loan, but that information should be available on loan servicers’ websites or on the Department of Education’s financial aid website.
As payments restart, roughly 1 in 3 borrowers will have a new loan servicer. The Education Department started emailing affected borrowers, and people should check their email or physical mail for updates.
A move to a new servicer may mean that borrowers who had automatic payments enabled may need to update their bank information. Those enrolled in income-driven repayment plans will still be eligible with their new servicer.
Q: What about student loan forgiveness?
A: The Biden administration is expected to release more information about repayment steps in the coming weeks, but it’s unlikely to include information about widespread loan forgiveness. Biden said he is in favor of erasing up to $10,000 in loans per borrower, though some liberal lawmakers want that figure at $50,000.
Deep disagreements among Democrats make concrete action seem far off.