Student Loan Freeze Extended For a Final Time

The current federal student loan freeze — a lifeline pausing repayments interest-free for millions of borrowers in the wake of the pandemic — will now last at least through Jan. 31, 2022. The student loan freeze was first enacted in 2020 and has been extended several times, but the Department of Education has referred to the current deadline as the “final extension” for this relief.

With the no-interest repayment pause now unlikely to continue beyond January, you’ll want to get ready to pick your payments back up. Particularly if you have a student loan in default, you should try to rehabilitate your repayment while you’re free from collections and any additional harm to your credit report.

The federal loan repayment pause, signed into law March 27, 2020, via the Coronavirus Aid, Relief and Economic Security (CARES) Act, was only supposed to last through Sept. 30, 2020. However, the resurgence of the COVID-19 crisis and its effect on the economy prompted several White House orders across two administrations to extend the relief program. As mentioned, the relief is now set to expire on Jan. 31.

“The payment pause has been a lifeline that allowed millions of Americans to focus on their families, health, and finances instead of student loans during the national emergency,” U.S. Secretary of Education Miguel Cardona said in a statement announcing this “final extension.”

Note that the relief is limited to student loans on the federal government’s balance sheet. Privately-owned Federal Family Education Loans (FFEL), school-sourced Perkins loans and alternative loans lent by banks and other entities were excluded.

Under the current freeze, eligible borrowers’ “non-payments” still count toward requirements for forgiveness under income-driven repayment (IDR) plans and the Public Service Loan Forgiveness (PSLF) program, as well as part of loan rehabilitation agreements. It also clarified that federal loan borrowers in default won’t see their wages garnished while the interest freeze remains in place.

As noted, the action limits temporary relief to student loans on the federal government’s balance sheet. Privately-owned Federal Family Education Loans (FFEL), school-sourced Perkins loans and alternative loans lent by banks and other entities are excluded. Fortunately, however, loans not covered by government relief could be supported by state governments and private lenders.

Allison Green
Boston Tutoring Services