U.S. Secretary of Education Miguel Cardona hinted that student loan relief may be ending — and student loan payments will restart.
Here’s what you need to know — and what it means for your student loans.
Student loan payments may be restarting sooner than you think. “At some point, people are going to have to start paying what they can to afford to pay,” Cardona said on MSNBC in an interview that will air this week, according to Business Insider. Cardona’s comments are consistent with similar comments that former White House Press Secretary Jen Psaki made last month. Psaki said that student loan borrowers will have to pay their student loans “at some time” during the Biden administration. So, if you’re hoping that student loan payments will be delayed indefinitely, you should expect that student loan payments eventually will restart.
Student loan relief: what’s at stake
What does the restart of student loan payment mean for your student loans? Since March 2020, student loan borrowers have enjoyed unprecedented student loan relief. Congress passed the Cares Act — the $2 trillion stimulus package — which, in part, provide financial relief to student loan borrowers. This included:
- no mandatory federal student loan payments;
- 0% interest rates on federal student loans; and
- no collection of student loans in default.
Both President Donald Trump and President Joe Biden extended this student loan relief through executive action. Importantly, student loan borrowers haven’t been required to pay a single dollar of their federal student loans during Biden’s presidency. Currently, this student loan forbearance is extended through August 31, 2022. This means that student loan borrowers should prepare to start making student loan payments beginning on September 1, 2022. At this time, your regular interest rate will restart too. If your student loans are in default, you could be subject to student loan debt collection, including wage garnishment. While there is speculation that Biden could extend student loan forbearance beyond August 31, Cardona’s comments may dispel that rumor. Cardona didn’t state when student loan payments will restart, but he also didn’t suggest that Biden is considering another extension of student loan forbearance. The prospect of student loan forgiveness could mean the end of student loan relief, especially if Biden cancels student loans imminently. (That said, Biden won’t cancel most student loan debt).
Student loan forgiveness: what Cardona said about student loan cancellation
President Joe Biden is considering whether to use executive action to cancel student loans for millions of Americans. Biden has said he could announce a decision within weeks. Since becoming president, Biden has canceled more than $17 billion of student loans. However, progressive Democrats in Congress and other student loan advocates say that wide-scale student loan cancellation is the best solution to solve the student loan debt crisis. Cardona didn’t comment on Biden’s potential plan for student loan forgiveness, although Cardona noted that the issue is “complex.” If Biden proceeds with student loan cancellation, Biden could seek to limit student loan forgiveness in several ways. This could include restricting which student loan borrowers qualify for student loan relief. For example, Biden could cancel only federal student loans or college student loans, which would exclude borrowers with private loans or graduate school student loans. Biden also could cap student loan relief with income requirements, which could exclude higher-income borrowers. If Biden ends student loan relief and student loan payments restart, now is the time to focus on paying off student loans. Here are some smart ways to save money on your student loans:
- Student loan refinancing (lower interest rate + lower payment)
- Income-driven repayment (lower payment)
- Student loan forgiveness (federal student loans)