Student loan payment moratorium extended through Jan. 31

Millions of student loan borrowers who haven't had to make a payment since the pandemic shut down the nation last winter just got an additional reprieve.

The payment pause, known as a forbearance, began March 13 as part of the original coronavirus relief package and has now been extended twice by the Trump administration, most recently through Jan. 31.

The pause has provided around 33 million borrowers with an interest-free respite from payments, preventing delinquency and subsequent default among those struggling to meet payments as the economy buckled.

Betsy Mayotte, president and founder of The Institute of Student Loan Advisors, says kicking the can down the road will only help borrowers. "Borrowers pursuing [Public Service Loan Forgiveness] get an extra free month toward their total," she says. "For borrowers in default pursuing loan rehabilitation, it’s another free month. For borrowers getting anxious about being able to afford payments when the waiver is lifted, it’s more time to determine their strategy."

Despite the fact that the economy hasn’t recovered from the ongoing pandemic, borrowers can expect their bills to arrive again and autopayments to resume after Jan. 31.

Will the forbearance be extended again?

President-elect Joe Biden could act as early as Jan. 20, Inauguration Day, but has not specifically said a forbearance extension is among his plans. Broad loan forgiveness is, but student loan policy experts say not to bank on that happening quickly, if at all.

Legislatively, efforts by House Democrats to extend the forbearance through Sept. 30, 2021, have stalled. Another relief bill could include longer extension of the forbearance; no detailed viable plan has yet emerged.

What can borrowers expect in the new year?

When your payments restart, Scott Buchanan, executive director of Student Loan Servicing Alliance, says:

• Expect your payment date to remain the same as before.
• If you are already enrolled in autopay, you will receive a notice before a payment is debited.
• Borrowers making payments for the first time should watch their inboxes and mailboxes for notice of their new billing date.

What to do if you can’t meet loan payments

"This very moment is when they should be looking at what their options are," Mayotte says.

If you think you may have difficulty repaying your debt, your best first option is to enroll in an income-driven repayment plan, which could help keep your payments manageable by setting the amount you pay at a portion of your income. It could even be zero if you’re unemployed or underemployed (earning under 150% of the poverty line).

Your next best option is an unemployment deferment if you’re out of work. It allows you to postpone repayment of federal student loans for up to 36 months if you’re receiving unemployment benefits or working part time while looking for full-time work. But unlike the current payment pause, interest may accrue and be added (capitalized) on top of your total loan when you resume payments.

What to ask your servicer

Buchanan advises borrowers to contact servicers now and submit everything needed to change repayment plans or pause payments. You should receive confirmation via email or in your servicer portal that your enrollment is moving forward.

Also, get anything you discuss over the phone in writing. Keep records of who you spoke with and the date.

When you call your servicer, ask about enrolling in an income-driven plan. There are four plans, but one that’s available to all federal direct loan borrowers is Revised Pay As You Earn, or REPAYE. It sets payments at 10% of your discretionary income and extends repayment to 20 or 25 years.

Parent PLUS borrowers should ask about income-contingent repayment, which caps payments at 20% of your discretionary income and extends repayment to 25 years.