Student loan borrowers get another pause on repayment

Contributed By:The 411 News

The U.S. Department of Education announced Wednesday an extension of the pause on student loan repayments to August 31, 2022. Repayment had been scheduled to restart May 1.

The pause on eligible federal loans includes a suspension of loan payments, a 0% interest rate, and a halt to collections on defaulted loans.

The extension will provide additional time for borrowers to plan for the resumption of payments, reducing the risk of delinquency and defaults after restart. During the extension, the Department will continue to assess the financial impacts of the pandemic on student loan borrowers and to prepare to transition borrowers smoothly back into repayment.

This includes allowing all borrowers with paused loans to receive a “fresh start” on repayment by eliminating the impact of delinquency and default and allowing them to reenter repayment in good standing.

For some borrowers, that fresh start could mean lower monthly repayments. The extension gives borrowers the time to revise payment plans with their lenders using one of 4 FSA (Federal Student Aid) repayment programs that bases the monthly payment on the borrowers' discretionary income.

The Department will also continue to provide loan relief, including to borrowers who have been defrauded by their institutions and those eligible for relief through the Public Service Loan Forgiveness program.

FSA will establish new partnerships to ensure that borrowers working in public service are automatically credited with progress toward forgiveness, eliminating paperwork that prevents many borrowers from getting help.

FSA will also continue to transfer loans to servicers committed to working under new, stronger accountability rules.

Story Posted:04/07/2022