What to Know About the Student Loan Payment Pause Extension

Federal student loan payments have been paused since March 2020, and the Department of Education recently announced that borrowers will have even more time before payments are set to resume. Though the loans have been in limbo for nearly three years now, it’s important to remain prepared for when the pause is lifted. To help you get ready for when payments resume, here’s what you need to know about the recent student loan pause extension:

Why the Student Loan Payment Pause Was Extended

Student loans were originally put on hold to provide economic relief at the beginning of the COVID-19 pandemic. Though the pause was only supposed to last for a few months, the pandemic continued to severely impact the financial stability of millions of Americans well beyond the expected timeline. To help borrowers through the ongoing public health crisis, the Trump and Biden administrations extended the pause several times over the last few years.

Before the most recent extension, student loan bills were scheduled to resume in January of 2023. However, the Biden administration also took steps toward Student loan forgiveness by announcing that a new program would discharge up to $20,000 of federal loans for each qualifying student.

Before students could find relief through loan forgiveness several states and institutions filed lawsuits against the plan to prevent it from taking effect. With the legality of the forgiveness program in question, the case has gone all the way to the Supreme Court. The Justices have set a hearing date on February 28, 2023, to determine whether the President has the authority to eliminate the loans without an act of Congress.

While student loan forgiveness is being debated in court, the payment pause will remain in effect. According to the Department of Education, the pause is extended because they “don’t think it’s right to ask you to pay on loans you wouldn’t have to pay were it not for the lawsuits challenging the program.”

When Will Student Loan Payments Resume?

Unlike the previous pause extensions, the most recent extension doesn’t have a specific end date. Instead, the timeline will be determined by the duration of the legal battle over the student loan forgiveness program.

If the Supreme Court reaches a decision prior to June 2023, then payments will resume 60 days from the date of that decision. However, if the Supreme Court does not decide by then, the payments will begin 60 days after June 30, 2023. The absolute latest that payments will resume is August 29, 2023 – though borrowers should remain prepared in case the pause ends sooner.

Student Loan Payment Pause FAQs

What does the pause on student loan payments mean?

The pause on federal student loans allows students to temporarily skip payments without consequences. The Department of Education stopped collections on defaulted accounts and set loan interest rates to 0% so that debt does not continue to accrue.

What if I was behind on my student loans before the pause began?

Millions of Americans were behind on student loan payments even before the pause began. To address this problem, the Department of Education announced the Fresh Start initiative, which provides relief to payers who are in default by:

• Granting access to federal student aid for students with an unfinished degree
• Not garnishing wages or withholding tax refunds and Social Security payments
• Restoring the ability to rehabilitate loans later on down the road
• Providing access to student loan forgiveness programs and IDR plans

Should I keep paying during the student loan pause?

It is possible to continue making payments during the student loan pause, and doing so could be beneficial depending on your situation. Ask yourself these questions to determine if it makes sense for you to continue repaying your loans:

• Do I have other forms of debt? If you are swamped with debts outside of your student loans, then you should take this opportunity to pay off as much as possible. Use the cash you’re saving on student loans to pay down things like credit cards, personal loans, medical bills, and more.
• Do I have a healthy savings account? The main purpose of the student loan pause is to give borrowers the chance to build financial stability. If you are living paycheck to paycheck without any backup savings, this payment pause may be a good time to fill up your bank account with a little extra padding.
• Will I still have a large balance even if student loans are forgiven? If all of your debt could be forgiven through the student loan forgiveness program, then it’s best to wait until the Supreme Court reaches a decision to avoid making payments on a loan that could be wiped out entirely. However, if you will still have a lot left on your account even if a portion of your loans are forgiven – and you have the ability to pay – then it could be a good idea to continue with regular payments.
• Can I eliminate student loans in bankruptcy? The Department of Education issued new guidelines in November to make it easier to eliminate student loans in bankruptcy.  Many people who could not eliminate student loans int eh past in a bankruptcy, can now utilize these new guidelines and eliminate their student loans.
• Am I using an income-driven repayment (IDR) plan? With an IDR plan, your loan balance will be forgiven completely after making a certain number of qualifying payments. During the student loan payment pause, each month counts toward a qualifying payment regardless of whether or not you pay. With this in mind, it typically doesn’t make sense to continue with payments when enrolled in an IDR plan.

Will automatic payments restart once the pause is lifted?

Automatic payments will not restart on their own. Borrowers will have to opt-in to confirm their enrollment before payments will be taken out of their accounts.

Student Loan Debt Relief

With the student loan forgiveness program on hold, many borrowers are waiting eagerly for the Supreme Court to reach a decision before taking action. However, it’s best to be proactive so you are financially prepared for the payments to resume, no matter what the legal verdict is.

If you are feeling overwhelmed by your financial situation and are concerned about affording your student loans once payments start back up, don’t wait to get help! The debt relief attorneys at OlsenDaines can help you create a plan of action. With over 20 years of experience serving Oregon residents, we know how to access creative relief solutions that can take the stress of serious debt off of your shoulders. From finding other forms of student loan forgiveness to eliminating debts through bankruptcy, we can help you reach financial freedom no matter what your circumstances are.

Need help regaining control of your finances? Contact us to explore your options in a free legal consultation!