President Joe Biden extends forbearance from federal student loans until September 30 – Forbes Advisor
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President Joe Biden may have been invested just hours ago, but he’s already making progress on his economic recovery plans.
Biden today signed an executive order extending the federal student loan forbearance period until at least September 30. The forbearance period began on March 13, 2020, so the total forbearance period will be 18 months at the end, unless there are further extensions. .
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Borrowers Get Long Break in Student Loan Payments and Interest Doesn’t Accumulate
The decree considerably extends the current student loan abstention period, which was due to expire at the end of this month.
From now until the end of September, most federal student loan borrowers will not be required to make any payments on their student loans; interest rates remain fixed at zero during this period, so borrowers will not see their balances increase until they make payments. Borrowers with past due student loans cannot have their wages garnished during this extended forbearance period.
The same contingencies of the previous extension announcements apply to this extended forbearance period. This means that Perkins and FFEL loans not owned by the Ministry of Education are not eligible for suspension of payments; private student loans are also ineligible. Instead, borrowers with these loans are advised to contact their service agent to review any payment assistance options that might be available.
Borrowers seeking loan forgiveness under the Public Service Loan Forgiveness Program (PSLF) will continue to have those months count towards their eligibility, even if they do not make payments.
The federal student loan forbearance period was first implemented in March in response to the economic crisis triggered by the coronavirus pandemic, and was then incorporated into the CARES Act by former President Donald Trump. The suspension period has been extended twice by the Trump administration.
What about the cancellation of the student loan?
Student loans are a pervasive burden. Over 60% of seniors graduating from public and private nonprofit colleges in 2019 had student loans, with an average debt of $ 28,950, according to the Institute for College Access and Success, a student rights organization.
Biden has expressed support for canceling the $ 10,000 per borrower student loan, and some lawmakers have pushed him to cancel even more. But the cancellation of the student loan does not apply to the extended forbearance period granted today — and he was left out of his recent $ 1.9 trillion stimulus proposal.
The cancellation of student loan debt is a widely debated topic among lawmakers. Some argue that canceling large amounts of student loans only benefits middle to high-income earners, as they carry most of the country’s $ 1.56 trillion in student debt. Others say that without having to pay a student loan, borrowers could instead spend that money and stimulate the economy.
It’s unclear when, or if, President Biden will cancel student loans. For now, borrowers should focus on the forbearance period currently available to them and start planning for the end of the forbearance period. Options for further relief, if forbearance is not extended, include enrolling in an income-based repayment plan to reduce monthly payments.
Biden has broad federal student loan reform plans. His campaign proposals included simplifying the repayment plan system, a simpler and more streamlined civil service loan cancellation option, and allowing the discharge of student loans in bankruptcy.