The Department of Education is sending out mass notices to borrowers about the student loan pause, warning them that they will have to resume repayment soon.
“The stopped collections and 0% interest period were extended one last time,” the emailed statement says in boldface text. “This is the final deadline. Payments will restart after January 31, 2022.”
Last month, the Biden administration extended the student loan payment pause, interest freeze, and collections suspension to January 31, 2022. The relief had originally been scheduled to expire on September 30. In its original announcement, the administration had characterized the move as a “final” extension of the student loan relief, which has been in effect since March 2020.
The warning from the Department of Education comes as the federal eviction moratorium ends following a Supreme Court decision, federal extended unemployment benefits are set to expire, and the latest pandemic wave caused by the Delta variant shows no sign of letting up. Millions of Americans are also facing ongoing natural disasters including wildfires in the west, hurricanes hitting the Gulf coast, and now widespread flooding in the southeast, Mid-Atlantic, and New England. The Biden administration’s firm language in its statement suggests that these external factors would not be a basis for a further extension of the student loan pause, contrasting with earlier statements (prior to the most recent extension) that economic and public health conditions would be considered in its decisions regarding extending or expanding student loan relief.
Meanwhile, the Department of Education has still not announced a formal plan for addressing looming, and potentially massive, disruptions caused by the upcoming departure of several student loan servicers, including FedLoan Servicing, which handles the Public Service Loan Forgiveness program. The Biden administration will have to transfer over 10 million student loan borrower accounts to other loan servicers in the coming months. These transfers have historically been chaotic, leading to widespread problems for borrowers such as credit damage and lost records. The Biden administration has suggested it will be considering so-called bridge contracts with other student loan servicers to take over the impacted accounts. But no plan or timeline has been announced.
The Biden administration has also not announced any formal decision on whether it intends to pursue widespread student loan cancellation. Biden has cancelled hundreds of millions of dollars in student loan debt for borrowers administratively over the last several months, but this amounts to a small fraction of the $1.8 trillion in student loan debt that remains outstanding. Leading congressional Democrats and dozens of student loan borrower advocacy groups have argued that President Biden has broad authority to enact widespread student loan forgiveness using executive action; in April, Biden ordered his administration to conduct a legal review of these statutory authorities, but there has yet to be any announcement indicating the review has reached a conclusion.
In its message to borrowers, the Department urges borrowers to “update your contact information” and “start planning for repayment” to resume. The Department warns borrowers to “pay attention to updates” during the next several months.
In the coming months, student loan borrowers may also want to consider requesting a recalculation of their payments under income-driven repayment plans if their financial circumstances have worsened. Borrowers on track for Public Service Loan Forgiveness may want to certify their employment and confirm qualifying payments before repayment resumes and servicing transfers occur. And all borrowers should take the time to retain all important records such as payment histories and key correspondence.