Dear Clients & Friends,
This weekend’s reading is a quick recap of the recent Student Loan repayment extension.
Payments have been on hold since the beginning of the pandemic in March 2020.
On April 6th, the U.S. Department of Education announced another extension for federal student loan repayment, making the new due date August 31st, 2022. The previous extension was set to end on April 30th. This is the sixth extension of the repayment date since the beginning of the pandemic.
Education Secretary Miguel Cardona stated the following: "This additional extension will allow borrowers to gain more financial security as the economy continues to improve and as the nation continues to recover from the COVID-19 pandemic.”
A "fresh start"
As part of the extension, the Department of Education noted that it will give all federal student loan borrowers a "fresh start" by allowing them to enter repayment in good standing, even those individuals whose loans had been delinquent or in default. The Department's press release stated: "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."
More information about loan rehabilitation will be coming from the Department in the weeks ahead.
What should borrowers do between now and September?
Approximately 41 million Americans have federal student loans.4 There are many things borrowers can do between now and September 2022 in order to prepare for the reinstitution of payment due dates.
Seek to build up financial reserves over the next few months in preparation to make a payment in September.
Continue making student loan payments during the pause, in part because the full amount of the payment will be applied to the principal balance. Interest doesn't accrue during the pause. Borrowers who continue making payments during this time may be able to save money in the long term, because interest will accrue on a smaller principal balance when the pause ends.
For public service workers: apply for the federal Public Service Loan Forgiveness (PSLF) program.
Pay attention to the news. There has been increased political pressure on the current administration to enact some type of student loan cancellation, ranging from $10,000 per borrower to full cancellation. If you agree with proposals like these, make your voice heard by your representatives in Congress. Few people take concrete steps to advocate for change in a way that invites real progress. Be a source of change!
That’s it for today. Just a quick recap for those of us with student debt, or those of us who know a parent or student with debt. As always, feel free to pass along our articles to anyone who might benefit from them.