Since the March 2020 federal declaration of a national emergency due to the COVID-19 pandemic,
federal student loan borrowers have had their payments and accrual of interest paused.
At the time, the U.S. Department of Education (ED) began a large-scale communication effort about the relief provided to federal student loan borrowers – that all payments, interest
accrual, and involuntary collections on defaulted loans had been suspended. As the pandemic’s severe impacts continued, so did the relief, extended by both Congress and the White House.
The relief is set to expire in about three months, on Sept. 30. As this date approaches, borrowers may feel confused, as the messaging from Washington has been a bit unclear. Recently, ED Secretary Miguel Cardona said that, while borrowers should anticipate
an Oct. 1 repayment restart, a further extension was under consideration.
Relatedly, the U.S. Senate has yet to confirm President Biden’s nominee for undersecretary of education, James Kvaal, who in that role would oversee
higher education policy at ED. Also, many await the results of a memo that the White House asked ED and the Department of Justice to draft on the president’s authority to administer student loan debt forgiveness
without any congressional action.
Meanwhile, top Republicans on both the House and Senate education committees have urged the secretary to not further extend the repayment freeze, citing the associated costs.
While the path forward is not yet clear, it appears that borrowers must ultimately be prepared to begin loan repayment in the fall.
The resumption of repayment also presents challenges for how loan servicers, organizations paid by ED to work with borrowers, will be able to assist borrowers. Servicers must have the operational capacity to manage the repayment-related inquires and requests
that potentially millions of borrowers could have simultaneously once repayment begins again.
Lastly, the current state of the economic recovery brings further considerations. At the end of 2020, survey research published by the Pew Charitable Trusts found that roughly 6 in 10 respondents benefiting from federal student loan relief said that they would have difficulty affording payments in the event of a restart.
How to Advise Students
NCAN knows this is a confusing time for our member-served students who are repaying their federal loans. In advising students on this matter, NCAN encourages our member programs to communicate these crucial messages.
Student borrowers should check their student loan accounts through their servicer to see if there is a date for when their next payment is due. Loan servicers may already be updating payment due dates based on the expected relief expiration
date. Students should make sure their contact information is up to date in their profile on the loan servicer’s website.
Student borrowers should consider their repayment plan options and, if necessary, whether they need to request additional forbearance (where interest may accrue) directly with
their student loan servicer. Loan servicers also can assist borrowers in selecting a new repayment plan that makes the most financial sense for them.
For those in an income-driven repayment (IDR) plan, ED has informed borrowers that they will be notified of new recertification dates but can recertify in advance by contacting their loan servicer.
Student borrowers should expect to do what their servicer articulates and avoid leaning on speculation or news stories that attempt to predict a further extension of this relief or what else could happen at the federal level.
Email to a Friend