When it comes to student loans, there are warring headlines and plenty of debates, but one thing seems clear: The pause in federal student loan payments is coming to an end. Most borrowers must resume payments in February.
In August, the Biden administration announced a “final” extension of the pause in federal student loan repayment, interest and collections through Jan. 31, 2022. Issuing a firm end date six months ahead was meant to give borrowers time to make plans and avoid delinquency after the restart.
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The pause, begun in March 2020 when the economy was first hit by the Covid-19 pandemic, has amounted to a federal student loan payment holiday. And as we all know, every holiday must end. Absorbing the do’s and don’ts on resumption of payments may make it less painful.
Planning for the first loan payment in 2022
After the pause ends, your loan servicer will send you a billing statement or other notice, according to studentaid.gov. The notice will include your payment due date, upcoming interest, and the payment amount. Your payment will be due no sooner than 21 days after your servicer sends the billing statement. The first payment most loan holders make will probably be in February.
The smart plan is to prepare now for the resumption of payments on your end. Update your address and other stats with your loan servicer if necessary, and ensure that you stay with autopay, if that’s what you want.
Making the payment pause work to your advantage
Some borrowers have been paying throughout the pause because the absence of interest means they can catch up faster on what they owe. To see the loan principal go down is everyone’s goal.
What if this reprieve from loan payments won’t be enough? The prospect of going over a financial cliff can keep you up at night.
The long forbearance could be a good time to consider one of the Education Department’s repayment plans, like income-based repayment. Consolidating your federal student loans may also lower your monthly payments.
If you work for a nonprofit or in the public sector, you might qualify for federal student loan forgiveness. This year President Joe Biden also pushed through federal student debt forgiveness for those with permanent disabilities. Seek out the details of these programs if you qualify.
Another option is to refinance your federal or private student loans with a private lender if you can get a lower rate and you qualify. (Just realize that refinancing federal student loans would make them ineligible for loan forgiveness, income-driven repayment plans or prolonged deferment.)
If you fear you just won’t be able to resume payments at all, it’s a good idea to act now, contact your loan servicer and find out what’s possible. Not making payments could result in a lowered credit rating and debt collection.
What about student loan forgiveness?
There are a lot of unanswered questions in the debate over federal student loans, which are held by 42 million Americans. One of them is the possibility of widespread loan forgiveness.
A group of Democratic leaders believe that the government should wipe out a certain amount of student debt because it can create heavy burdens. Senate Majority Leader Chuck Schumer heads up a group calling for cancellation of $50,000 in federal student loan debt per student. But it’s important to know that no such bill is making its way through Congress.
Nor has Biden confirmed that he agrees with the $50,000 write-off proposal. Some political observers say the president might cancel $10,000 in individual student debt. He asked for opinions from the Justice and Education departments months ago on whether he had the power to do so without going through Congress, but no such guidance has yet been shared with the public.
Even if the president announces that $10,000 in debt will be forgiven, there are caveats. Only holders of certain federal student loans would be eligible — and cancellation would not apply to private loans at all.
What happens when a loan servicer quits?
On Sept. 29, 2021, the Department of Education announced that Navient plans to quit servicing federal student loans. This is causing ripples, as Navient is the largest student loan servicer in the United States, with six million borrowers. The company will work with the Education Department on transferring the loan accounts to Maximus, another contractor. The deal is expected to be finalized around the beginning of the fourth quarter in 2021. If you are a Navient customer, there are a few things to do during the transition period.
Higher education expert Mark Kantrowitz told CNBC that he recommends logging into your current loan servicer’s website and saving or printing a copy of your loan information: a list of all your loans, payment history, current balances, interest rates and monthly loan payment amounts. Keeping this handy can help ensure that everything is correct with the new loan servicer.
Navient is not the first to make such an exit. This summer, FedLoan Servicing and Granite State Management & Resources
If you’re not sure who holds your loan and you are unable to log on to your student loan portal, you can call
Before the federal student loan payment holiday ends at the end of January 2022, a smart approach is to learn all you can about payment options so you’ll be ready.
SoFi Student Loan Refinance
IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS, PLEASE BE AWARE OF RECENT LEGISLATIVE CHANGES THAT HAVE SUSPENDED ALL FEDERAL STUDENT LOAN PAYMENTS AND WAIVED INTEREST CHARGES ON FEDERALLY HELD LOANS UNTIL THE END OF JANUARY 2022 DUE TO COVID-19. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE IN DOING SO YOU WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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