Big Changes to Public Service Loan Forgiveness Program
COVID relief for federal student loans has been extended until January 31, 2021.
On Friday, the U.S. Department of Education announced it would extend relief one more month, until January 31, giving some continuation while Congress agrees on additional COVID-19 relief.
It’s still possible that Congress will extend the relief past January 31, but Congress has yet to approve a plan for more COVID relief despite months-long negotiations. A bipartisan proposal was unveiled earlier this week and included a provision to continue the pause on student loan payments.
The uncertainty of what will happen next still exists and we are all anxious and concerned. Lawmakers have a December 11 deadline to pass a bill to prevent a government shutdown –– this is all amid a nationwide coronavirus surge.
What you need to know:
Having extended relief until January 31 is a good thing for borrowers (who is going to complain about no payments and 0% interest?!), and it’s helpful to have some continuation while Congress agrees on a COVID-19 relief plan and the Biden administration decides what to do with student loans.
Those who want to make their payments can still do so. Benefiting from a 0% interest rate, payments will go to principal, which may allow some borrowers to pay off their loans faster.
On the other hand, borrowers are still left with the uncertainty of what happens next beyond January 31.
“We know that periods of uncertainty and transition can cause borrowers to fall off track with repayment," says Sarah Sattelmeyer, director of the Pew Charitable Trust’s Student Borrower Success project.
This pause affects about 41 million borrowers but research from Pew conducted in August-September found that, among borrowers who said the relief applied to them, about 40% did not know when their loan payments were set to resume. Help us spread the word by sharing this article!
Forgiving student loan debt is still on the table, especially for the Biden administration. Some lawmakers are urging Biden to cancel up to $50,000 of student loan debt per person via executive order, but he hasn’t indicated that he is on board for that relief plan yet.
In Biden’s campaign proposal, he outlined a number of changes to student loans, including canceling $10,000 of debt for certain income brackets and reducing the cost of community college and public universities. Even with his plan, he has not committed to implementing it with an executive order. Still, he has been getting pressure for more student loan forgiveness from politicians like AOC, Elizabeth Warren and Chuck Schumer.
Other experts think that Biden is on the right track and he shouldn’t listen to the pressure –– that forgiving all or most student debt could have larger consequences for the entire student loan system.
We will have to wait and see if anything changes in the first 100 days of the Biden administration.
The Snowball team is focused on keeping you informed and helping you make the right decisions for your student loans. Sign up here for our Student Debt Report –– we’ll send you an email whenever there are significant changes in policy.