Will Student Loans Be Paused Again?

Will student loans be paused again is a question many are asking right now seeing as how it's become a hot button topic

By Rick Gonzales | Published

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will student loans be paused again

For the millions and millions of student loan borrowers, it has been one reprieve after another. That’s the good news. The bad news is that the end is in sight. What it all will look like, once that end arrives, is anyone’s guess, but according to President Joe Biden, this last pause in student loan repayment will actually be the last one. So, here’s the big question – will student loans be paused again?

COVID AND STUDENT LOANS

Since March 2020 and the passage of the CARES Act (or the COVID Economic Relief Package), students have not had to either start or continue the repayment of their student loans. The question of will student loans be paused again was easy because Ex-President Trump, bypassing stalled negotiations in Congress at the time (imagine that), signed a series of executive orders that started the whole student loan forgiveness debate.

The initial pandemic relief on student loans was set to expire in September 2020, so Trump’s first extension was a three-month one that was going to have students (or parents) begin loan repayment in December 2020. At the time, it was stressed that what President Trump was offering was a suspension of student loan repayment, not debt forgiveness. “One thing people need to keep in mind is that a suspension of payments is not the same as debt forgiveness,” said National Foundation for Credit Counseling (NFCC) spokesman Bruce McClary to CNBC at the time.

As the second loan repayment delay was reaching its conclusion, President Trump once again decided, with all the damage COVID continued to do, that one more delay in the repayment of student loans was necessary. So, for the third time, he made that happen. Now, will student loans be paused again is the next question.

CHANGING OF THE GUARD

You can say what you want about President Biden’s time in office, and many, many have, but the one thing he has remained consistent on, and something that he aligned himself up with ex-President Trump on, was the delay of student loan repayment. Both men agree on very little, but the one thing they see eye-to-eye on is making sure students can survive. In this case, whether student loans would be paused again was a bipartisan issue.

While President Trump was able to delay repayment three times, President Biden has continued on with the relief, even bypassing Trump’s number by one. Biden has delayed repayment three times and on August 24, 2022, he made the announcement that he will delay it for his fourth time and seventh overall. This delay will last until December 31, 2022. As with each and every other delay, students will not have to begin payments, nor will they be charged interest. On January 1, 2023, regular payments will commence.

WILL STUDENT LOANS BE PAUSED AGAIN AFTER?

It doesn’t make a difference as to which company is servicing your student loans when it comes to whether will student loans be paused again. This seventh moratorium on student loan payments and interest covers all. The following list are the eligible student loans:

  • Direct federal student loans.
  • FFEL or Federal Family Education Loan program. These are loans held by the Department of Education.
  • Department of Education held Federal Perkins Loans.
  • Defaulted Federal Family Education Loans that are not held by the Department of Education.
  • Defaulted Health Education Assistance Loans.

WHO DOESN’T GET THE PAUSE BENEFIT?

So, we know there are millions of students and families who continue to be eligible for student loan payment relief even if student loans will be paused again. Unfortunately, there are still a large number of students who are not. These include:

  • Private student loans.
  • Nondefaulted Health Education Assistance Loans.
  • Nondefaulted Federal Family Education Loans not held by the Department of Education.
  • Federal Perkins loans not held by the Department of Education.

If you fall into the moratorium category then your payments were automatically paused in March 2020. Each time there has been another pause, it has all been automatic, not requiring students or parents to do anything.

MORE PLEASE?

Now the big question that arises as we get closer and closer to the December 31, 2022 “final” extension is if that will truly be the final extension. Seven is a nice number but there are plenty of students who hope that their student loan payment won’t start at the beginning of the new year, looking for an eighth moratorium. These are the ones most asking, will student loans be paused again? Of course, even with President Biden stating that this last delay will be the final one, it is not officially set in stone. As shown in the past, depending on the temperature of the people, we just may see another delay in student loan repayments.

There are a number of industry experts who think, though, that we will see one more pause that would take students into July 2023. This would mark the earliest point at which federal student loan programs could be overhauled and that appears to be the goal of the Biden Administration. It was certainly the goal of the Trump Administration.

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It is all going to come down to the political climate after the November mid-terms. Biden’s administration could be reeling from the mid-terms, so another pause may be called for to regain some footing. With all that in mind, Biden’s call for loan forgiveness may play a big part in this as well.

WHO QUALIFIES?

Along with President Biden’s call for a seventh delay in student loan repayment, he also announced his order to cancel $10,000 in student loan debt with the opportunity for another $10,000 in debt relief. The way this will work is if borrowers have an annual income of $125,000 or less (for individuals) or $250,000 (for head of household or married couples) they will qualify for $10,000 in relief if the loan is held by the Department of Education. If borrowers also received a Pell Grant loan and they meet the above income limits, they too will get an extra $10,000 relief, making the total amount of $20,000.

As you can imagine, this announcement was not met with overwhelming approval. The concern for allowing this $20,000 in student loan relief is just how that money gets paid for and by whom. The thought is that taxes will increase to cover this cost, which puts the many who do not have student loan debt or who have not gone to college in a bad situation. Why should they have to fund those who went to college? This debt relief is not a done deal, although the Biden Administration has announced it.

There is a strong possibility that lawsuits will arise from this, though it isn’t a given that this student loan forgiveness can even be challenged. As soon as more definition is given as to how the Biden Administration plans to move forward, we’ll be sure to update you.