On his first day in office, President Joe Biden directed the U.S. Department of Education to extend the break on repaying federal student loans until September 30.
The forbearance payment extension was among a series of executive actions signed by President Joe Biden on his first day in office. The payment holiday was previously set to expire on Jan. 31, under the COVID-19 response act approved last year.
This means that even though you won’t be required to make payments on direct loans, you will be credited as having made a payment if you’re a candidate for Public Service Loan Forgiveness, according to Todd Friedhaber, a student loan counseling manager who leads Cambridge Credit Counseling workshops for NYSUT members. He noted the payment suspension doesn’t apply to commercially held Federal Family Education Loans, Perkins loans, or any private loans. Anyone holding these types of loans should contact their servicer or lender directly to see if any relief options are available.
This could be the first of several student loan relief measures under consideration. “Potential changes aren’t set in stone, but it looks like we could see some significant changes,” Friedhaber said.
What could be coming? Here’s a quick summary of what has been discussed. Keep in mind these changes would have to be approved by Congress, and they could be changed significantly or dropped from any bill that makes it to the president’s desk, Friedhaber noted.
Members of the new administration have been outspoken about forgiving up to $10,000 in student loan debt. The American Rescue Plan that was announced on Jan. 14 didn’t include debt forgiveness, but that doesn’t mean the option is off the table. Loan forgiveness would probably apply to undergrad loan balances only, not to loans used for grad school, and would likely phase out for people earning $125,000 or more.
Income-based repayment plans could be revised. Borrowers would pay 5 percent of discretionary income, rather than the current 10–20 percent.
Forgiveness of undergrad loans for borrowers who provide a public service would be capped at $50,000, with $10,000 forgiven after each year of qualifying employment.
PSLF is unlikely to be replaced, but it could be overhauled to include more loan types and repayment plans. Half of the borrower’s debt would be wiped out after 5 years, and any remaining balance could be forgiven after 120 payments have been made.