For more than nine months, most people with Federal student loans haven’t been required to make monthly payments because of the coronavirus pandemic.
But we all knew this wouldn’t last forever.
The government extended the 0% interest and the $0 monthly payment several times, and now with 2020 coming to a close, a lot of people are asking: what’s going on with my student loans?
**Quick note: if you have private loans, everything we’re about to say won’t apply to you.
So, here’s where we are right now.
In early December 2020, Education Secretary Betsy DeVos extended the 0% interest and $0 monthly payment another month. Instead of interest starting to accrue again on January 1, 2021, it is now set to start accruing on February 1, 2021.
That perk doesn’t apply to all student loans, so if you’re still not sure whether you have to pay, it’s best to log into your servicer’s website and check your next due date and payment amount.
You may have heard that Congress passed a new stimulus bill on Monday. President Trump still needs to sign it, but, regardless, there is nothing in the bill that extends the 0% interest or the $0 minimum payment for Federal student loans beyond January 31, 2021.
But there is still a chance that this relief could be drawn out even longer.
President-elect Joe Biden could extend the 0% interest and $0 minimum payment without the help of Congress via executive action. There is optimism that this will happen, but we really won’t know for sure until January.
One of the most common questions we get from clients is whether we think all of their Federal loans will be forgiven when President-elect Joe Biden takes office. We say, don’t count it.
Forgiving all student loans is not a platform that the President-elect ran on. Recently, some Democratic Congressmen proposed that the President erase $50,000 of Federal student loan debt for each borrower. Biden has not indicated publicly that he supports this proposal.
We’re recommending that people plan as if student loan forgiveness isn’t going to happen. That way, you’re prepared no matter what.
As of this writing, Federal student loans are set to be due again in February 2021, so you should plan on incorporating that back into your budget. Be careful about lifestyle creep; if you got used to having more spending money because you weren’t paying your student loans, then use these last few weeks of relief to financially prepare.
Our suggestion? Save the exact student loan amount you’ll need to pay in February into a savings account in January.
One of the best places to stay up to date on coronavirus-related programs for Federal loans in the Federal Student Aid website: https://studentaid.gov/announcements-events/coronavirus
If you’re working towards Public Service Loan Forgiveness, confirm how many qualifying payments you’ve made as of this month.
