7 New Flexibilities As Student Loan Pause Ends

The student loan pause is officially coming to an end.

For over three years, most federal student loan borrowers have not had to make any payments due to the Covid-19 national emergency. The moratorium also suspended interest and halted all collections efforts against borrowers in default on their federal student loans.

The student loan pause was supposed to end last December. But President Joe Biden extended the pause again in response to legal challenges to his signature student loan forgiveness plan. Two of those challenges are now before the Supreme Court, which is expected to issue a ruling any day.

The debt ceiling deal negotiated by President Biden and House Republican leaders protects Biden’s student loan forgiveness plan, which congressional Republicans had hoped to repeal before the Supreme Court issues a decision. But the deal affirmatively ends the student loan pause 60 days after June 30th, leaving Biden with no option to extend it again, barring a new national emergency.

As 40 million borrowers lurch toward an unprecedented return to repayment, Biden administration officials have promised new flexibilities to ease the transition.

IDR Self-Reporting For Reducing Student Loan Payments

The Education Department is temporarily allowing borrowers to self-report their income when applying for income-driven repayment plans. IDR plans can provide affordable monthly payments that are tied to a borrower’s income and family size, even for very large balances. And these plans can lead to eventual student loan forgiveness.

Normally, borrowers must provide documentation of their income, such as a tax return or pay stub, with their IDR application. But the Biden administration is suspending this requirement, allowing borrowers to self-report their income until six months after the student loan pause ends.

This may make it significantly easier for borrowers to request IDR relief, whether borrowers are applying for the first time or requesting a reduction to their previous IDR payment due to changed circumstances. And it may reduce the burden loan servicers will face in processing potentially millions of IDR requests in the coming weeks and months.

IDR Recertification Dates Postponed For Student Loan Borrowers

Borrowers who have been in an IDR plan are typically required to recertify their income every 12 months. Changes to the borrower’s income can result in adjustments to their monthly IDR payments. And failing to recertify on time can have serious consequences, including interest capitalization and much higher monthly payments.

To ease the return to repayment for both borrowers and loan servicers, the Biden administration is postponing IDR recertification deadlines. “You won’t be required to recertify before payments restart, and the earliest you could be required to recertify is six months after the payment pause ends,” according to Education Department guidance.

Refunds For Borrowers Who Made Payments During Student Loan Pause

The Education Department is continuing its policy of allowing borrowers who made voluntary payments during the student loan pause to request refunds of those payments.

“You can get a refund for any payment (including auto-debit payments) you make during the payment pause (beginning March 13, 2020),” says department guidance. “Contact your loan servicer to request that your payment be refunded.”

Importantly, only loans covered by the student loan pause (and payments made on those loans during the pause) can be eligible for refunds.

New Application Procedures For Student Loan Forgiveness Through PSLF

The student loan pause period can count toward student loan forgiveness for borrowers seeking relief through the Public Service Loan Forgiveness program. And the Education Department has quietly rolled out a number of new flexibilities designed to streamline the PSLF application process.

The department has continued to expand the online PSLF Employer Search database, which allows borrowers to obtain a preliminary determination as to whether their employer qualifies for the program. And the administration has updated the online PSLF Help Tool, allowing both borrowers and their employers to certify qualifying public service employment entirely electronically, without the need for a paper application.

Fresh Start Will Extend Collections Suspension Features Of Student Loan Pause

In addition to suspending monthly payments and interest, the student loan pause has halted all collections efforts against borrowers who are in default on their federal loans. This means borrowers will not receive collections calls, get penalized with substantial collections fees and penalties, or be subject to involuntary collections actions such as wage garnishments or tax refund seizures.

As part of the new “Fresh Start” initiative, borrowers in default on their federal student loans will continue to be shielded from these collections efforts for one year after the student loan pause ends. The Fresh Start program can also provide these borrowers with a pathway out of default and back into good standing. And in some cases, periods of default after March 2020 can even count toward student loan forgiveness.

New Student Loan Repayment Plan Coming

The Biden administration is working on overhauling a key IDR plan. While specific details of the proposal are still being finalized, the plan could lower monthly payments by up to 50% or more, accelerate the timeline for borrowers to receive student loan forgiveness, and end costly excess interest accrual. In conjunction with the IDR Account Adjustment — which may also result in significant student loan forgiveness — the new program may substantially lower the overall costs of student loan repayment for millions of borrowers.

The overhaul is not expected to be available immediately when student loan payments resume. But borrowers should start to have access to these benefits sometime next year.

Biden Administration Considering Grace Period After Student Loan Pause Ends

Biden administration officials are also reportedly considering a grace period following the end of the student loan pause. During this period, borrowers may not be penalized for missing payments and may be able to avoid credit damage, late fees, and other negative consequences.

The details of the grace period are still being hashed out, but it’s possible that it could last for up to a year after payments resume.

Further Student Loan Forgiveness Reading

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Student Loan Forgiveness Eligibility Expanded In 3 Ways Under New Account Adjustment Guidance