Student loan pause won’t last; get ready for repayment

WASHINGTON » Four more months.

That’s how long federal student loan borrowers have before their loan payments start up again. Or maybe not.

It’s possible another repayment reprieve may stretch the loan pause until the end of this year. But, even if that happens, if you have federal loans, it’s time to start planning for the day when your payments will need to be paid.

Here’s what you need to know about the most recent extension, including major relief for borrowers who were in default before the payment pauses began.

HAS ANYTHING CHANGED WITH THE PAYMENT

PAUSE?

The relief stays the same, continuing to apply only to eligible federal student loans. The extension for student loan repayment, interest and collections runs until Aug. 31.

The pandemic-related payment pause, first offered in March 2020 for federal student loans, includes a zero percent interest rate, suspension of loan payments and suspension of collection actions on delinquent and defaulted loans.

But there was major news for people who were in default.

The pause provided borrowers in default temporary protection from collection activities, but that’s all. The Biden administration announced that these borrowers won’t go back into collections after the pause ends.

This will greatly relieve the financial pressure on millions of borrowers, including those from minority and low-income households, said Abby Shafroth, interim director of the National Consumer Law Center’s Student Loan Borrower Assistance Project.

“These borrowers will no longer be subject to the financially destabilizing collection practices that the government uses to collect on student loans once they’re in default,” Shafroth said.

— WHAT HELP WILL I GET IF MY LOANS WERE IN DEFAULT BEFORE THE PANDEMIC?

When someone defaults on their student loans, tax refunds can be seized, wages can be garnished and part of Social Security payments (including disability benefits) can be withheld. Defaulted borrowers can’t qualify for income-driven repayment programs and hardship deferments.

“Once a family struggles with unaffordable student loan debt, they can have the social safety net pulled out from underneath them,” Shafroth said.

At the start of the pandemic, under the Cares Act, collection actions for eligible defaulted loans were suspended. But many people worried about what