The past year has been a whirlwind of change because of the ongoing COVID-19 pandemic—homeschooling, unemployment, deaths and illness, childcare shifting, and extensive furloughing were just some of the many highlights of 2020.
The federal government has been trying to help the public stay afloat during these difficult times through financial relief programs. The CARES Act passed in March 2020 provided temporary relief to the 42.8 million student loan borrowers in the US by allowing a pause on student loan payments and levying an interest rate of 0% on these loans. As unemployment rates remained high, President Donald Trump extended the provision last fall through January 31, 2021. Recently, President Joe Biden further extended the relief through September 20, 2021.
The extension isn’t a part of a student loan forgiveness program but provides continued relief from student loan payments. Thanks to the move, from February 1, 2021, repayments for all federally owned student loans will be on hold, and the interest rate will remain 0% until September 30, 2021. Federally owned student loans include:
- non-commercially owned Federal Perkins Loans and Federal Family Education (FFEL) Program loans
- Direct Consolidation Loans
- Direct PLUS Loans for parents and graduate students
- Direct Stafford Loans
All federal student loan borrowers automatically fall under the purview, so they don’t have to sign up to have their interest or payments waived. However, if they wish to continue making their payments, they must call their loan service provider each month. It’s a good idea to speak to the student loan provider before deciding anything.
If you were defaulting on your loan payments before the pandemic, the extension is a great way for you to get caught up as no new loan payments need to be made before September 30. However, your financial situation may have gotten worse due to the pandemic, and you may be struggling to make ends meet. If this is the case, contact your student loan provider at the earliest possible and enquire what your repayments will look like once the extension lapses.