When the coronavirus pandemic first swept the United States in March 2020, student debt relief was among the first policies enacted to help struggling Americans. Since March 27, 2020, federal student loan interest rates have been set to 0% and payments have been paused.
For many months, the pause has repeatedly been extended as economists warned that ending the pause could lead to negative outcomes such as a spike in missed payments and delinquency (more than 1 in 4 borrowers were already in delinquency or default before the pandemic). And legislators such as Senators Elizabeth Warren of Massachusetts and Patty Murray of Washington have urged President Biden to extend the student loan moratorium into 2022.
"The pause on student loan payments has been a lifeline for families in Washington state and across the country, helping so many struggling borrowers to keep a roof over their heads and food on the table," Murray, chair of the Senate Health, Education, Labor and Pensions Committee, told CNBC Make It in July 2021.
However, student loan borrowers should prepare for several changes in the New Year. Here are three things they need to know right now:
Federal student loan payments resume in 2022
The pause on federal student loans is currently set to expire Jan 31.
For months now, experts have urged borrowers to prepare for payments to resume. Ashley Boucher, director of corporate communications for Sallie Mae says "looking ahead" will be key for borrowers as the pause deadline nears.
"Understand how your finances may have changed as a result of the pandemic," she says. "Are you changing your living scenario? Has your job changed? Has your income changed? What is your new budget?"
While each borrower's circumstances vary, Boucher stresses that the biggest thing any borrower can do right now is to check their balances so they have all of the information they need to make the right decision for them.
"The key, regardless of when you make payments again, is to know who you owe, know how much you owe," she says. "And know how everything is going to fit into this new budget that you may have for yourself."
Servicers are changing
By the end of 2021, over 10 million borrowers will have their student loans switched from one servicer to another. Borrowers with loans serviced by The Pennsylvania Higher Education Assistance Agency (often referred to as FedLoan), Granite State Management & Resources and Navient will be impacted.
Transitioning between servicers has been known to cause headaches for borrowers.
"In a perfect world, these transitions would be seamless to the borrower, but it may not be," says Kevin Walker, publisher of CollegeFinance.com. "And so borrowers have to pay attention."
Servicers should notify borrowers if their loans have been transferred but many borrowers miss this notification, explains Walker. Borrowers can check who their servicer is using the federal student aid dashboard to make sure they don't miss payments, or send payments to the wrong location.
You may be entitled to forgiveness
While the Biden Administration is still "examining" broad-based student loan forgiveness, some borrowers may be entitled to relief.
In October, the U.S. Department of Education announced a series of changes to the Public Service Loan Forgiveness Program. The PSLF allows borrowers with federal direct loans who make 120 qualifying monthly payments while working full-time for a qualifying employer to have the remainder of their balance forgiven. Qualifying employers include any federal, state, local or tribal government and not-for-profit organizations
Perhaps the biggest change announced is that the Department of Education will offer a limited waiver so that borrowers can have their payments counted, "regardless of loan type or repayment plan."
The Department estimates the waiver will bring over 550,000 borrowers an average of 23 payments closer to loan forgiveness and make 22,000 borrowers immediately entitled to the cancellation. But borrowers who need to consolidate will have to submit an application and a PSLF form by October 31, 2022 to have previously ineligible payments counted for this "temporary opportunity."
Jason DiLorenzo, founder and CEO of PSLFJobs, an employer consultant and jobs platform, emphasizes that borrowers who are interested in the PSLF should document how many payments they have made toward the required 120 monthly payments and complete an employment certification form, which confirms that a borrower's workplace qualifies them for public service loan forgiveness, as soon as possible.
This is the best way for borrowers to make sure their loans remain in the public service loan forgiveness program when they are transferred, says DiLorenzo.
"If you have made progress towards PSLF, submit another employment certification form now," he explains, stressing that this step is especially important for borrowers hoping to take advantage of the limited-time PSLF waiver. "You'll submit that employment certification form after you consolidate, and they'll go back and tell you how many qualifying payments you made. But you have to consolidate the loans within the next year, or the previous payments made on them don't count."
DiLorenzo admits that the upcoming changes could be "overwhelming" but says making sure they are keeping up with their progress towards forgiveness, borrowers can put themselves in the best possible position.
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