Student Loans: An Update as of January 2021

January 07, 2021

As the US economy grapples with the pandemic there have been multiple initiatives to help manage what has been a difficult situation for millions. One of those initiatives was a move to help with student loan payments.

On March 27th, Section 3513 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act provided zero-interest on federal student loans until September 30th, 2020. In addition to waiving the interest, the CARES Act suspended payments until September 30th as well.

On August 8th, 2020, an Executive Order directed the Department of Education to extend the zero-interest and payment suspension provisions through the end of 2020. All borrowers with federally held student loans had their payments automatically suspended until 2021 without penalty.

As of December 4, the Secretary of Education had again extended the term of the Executive Order to continue the student loan relief until the end of January, 2021. This includes the automatic suspension of payments and 0% interest. Borrowers continued to have the option to make payments if they so choose. Doing so will allow borrowers to pay off their loans more quickly and at a lower cost since payments made during the period of interest suspension are directly on principal.

On his first day in office, President Biden signed an executive order asking the providers of federal student loans to continue the suspension of payments and 0% interest until September 30, 2021.

What do I do to opt in for suspending payments?

In a word, nothing. Where you would have had to move the loan into forbearance before, now borrowers of eligible federal student loans do not need to do anything to have their federal student loan payments suspended under the CARES Act and the subsequent continuations. The payments are paused, and the interest waiver is automatic.

So, what should I do? 

It is a good idea to monitor your student loan statement to make sure you are not charged late fees by mistake. Also, monitor your credit to be sure you are not mistakenly punished for not making payments. If the zero-interest order expires at the end of January, but your finances are not back to normal, check with your loan servicer for an extension or new relief programs.

What if my student loan does not qualify? 

To determine if your loan is federally owned go here. Federal Perkins loans held by the institution you attended, Federal Family Education Loans held with private and state lenders, and private student loans are not included in the CARES Act provision or extensions, but there still may be help available. Many banks and lenders are offering programs to offset the effects of this crisis for their customers but to get the relief, you will likely have to ask. Private student loan lenders may offer a form of forbearance, but you will need to clarify the details on the interest rates and fees involved. As you would with federal loans, be cautious about interest accrual in forbearance and get the details in writing.