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Debt relief provided to federal student loan borrowers has been extended into next year, But the Department of Education says it does not expect new relief to be applied afterward.
Under the Coronavirus Aid, Relief and Economic Security Act, or CARES Act, federal student loan payments and interest suspended, to help people struggling to make ends meet due to the pandemic.
Collection actions for delinquent loans were paralyzed. Also negative credit reports for eligible federal student loans, meaning the Department of Education reported suspended payments to major credit bureaus as if they were done on time.
Relief related to the pandemic was scheduled to end on September 30, but now the moratorium has been extended for another four months, until January 31, 2022, CNN reported.
“As our nation’s economy continues to rebound from a deep hole, this final extension will give students and borrowers the time they need to plan for the restart and ensure a smooth path back to payment,” said the secretary of Education, Miguel Cardona, in a statement.
Borrowers’ balances have been effectively frozen for over a year, No federal loan payments required since March 2020.
During this time, interest has stopped accruing, saving the average borrower about $ 2,000 in the first year, and defaulted collections have been suspended while the debt has been on hold.
The relief is even more significant for those who work in the public sector and may be eligible for loan forgiveness after 10 years, because they are still receiving credit for those 10 years of required payments as if they had continued to make them during the pandemic. as long as they continue to work full time for qualified employers.
Both the pause in payments and the interest waiver are automatic, but only apply to federal government loans.
That covers about 85% of all federal student loans, including those known as direct federal loans and PLUS loans that parents have obtained on behalf of their children. It excludes some federal loans that are guaranteed by the government but are not technically maintained by the government.
Since taking office, Biden has written off about $ 1.5 billion in debt for borrowers who were defrauded by his for-profit colleges.