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Student Loan Payment Relief Extension: What We Know

Good news update! Student loan payment relief has now been extended through Sept. 30, 2021, adding another eight months of relief for borrowers. The new extension follows the same criteria outlined below.

Get Updates About Student Loan Payment Relief

Whatever happens with federal student loan relief, we'll let you know! Whether relief extends or ends, we'll tell you what the next steps are in paying off your student loans.

Unless you’ve got a crystal ball, you probably never would have guessed how crazy things would get over the past year. It’s been a whirlwind of change! And for people who have been severely impacted by the COVID-19 pandemic—deaths and illness in the family, unemployment, furloughs, homeschooling, childcare shifting—whirlwind is the understatement of the century. 

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One of the ways the federal government has been trying to calm the storm is through financial relief programs. And if you’re one of the 42.8 million student loan borrowers out there, then you might have gotten some temporary relief on your student loan payments through the CARES Act passed in March 2020.1 But after being extended last fall, the relief was set to end Jan. 31, 2021. Now with the crystal ball as hazy as ever, the president has made an executive order to extend the emergency student loan deferment again through Sept. 30, 2021.2 

All the details haven’t been hammered out yet, so wait just a sec before you do your I-don’t-have-to-pay-my-student-loans-for-eight-more-months happy dance. Let’s take a look at what we know about the student loan payment relief extension and if it applies to your situation.

How the CARES Act Affected Student Loans

Let’s flashback to March 2020 for a minute. COVID-19 was just beginning to pick up steam in the United States and cases were rising across the country. In an effort to slow down the spread of the virus, many states went into varying levels of lockdown, ranging from full-on stay-at-home orders to looser safer-at-home suggestions.

As a result, in just a matter of weeks, millions of people suddenly found themselves jobless as businesses buckled. In order to help Americans and stimulate the economy, Congress passed the $2.2 trillion Coronavirus Aid, Relief, and Economic Security Act (aka the CARES Act).

The CARES Act wasn’t perfect, but it attempted to help Americans with federally owned student loans by offering:

  1. Temporary payment suspension
  2. A 0% interest rate
  3. A pause on all collections and wage garnishments on defaulted loans

The CARES Act expired as of Sept. 30, 2020. But as the pandemic continued on and unemployment rates remained sky-high, President Donald Trump opted to extend student loan relief until Jan. 31, 2021.3 Now President Joe Biden has extended it again through Sept. 30, 2021.

How the Student Loan Payment Relief Extension Affects Your Student Loans

OK, first things first: This isn't part of a student loan forgiveness plan, but it's continued relief from student loan payments. There may be other relief packages on the way, but for now, let’s focus on what we know about student loan debt relief.

The basic takeaway is this: Beginning Feb. 1, 2021, repayment of all federally owned student loans is on pause, and the interest rate will remain at 0% until the end of September.

But what counts as a federally owned student loan? Here’s what’s included: Direct Stafford Loans, Direct PLUS Loans for parents and graduate students, and Direct Consolidation Loans. It also covers Federal Perkins Loans and Federal Family Education (FFEL) Program loans if they aren’t commercially owned.

Like the original piece of the CARES Act, all borrowers with federally owned student loans are automatically included. That means you don’t have to sign up to have your payments or interest waived—it should happen without you needing to do anything. In fact, if you want to keep making payments, you have to call your loan servicer each month to make a payment. But we still recommend checking in with your student loan provider.

Navigating student loan repayment can be a total maze even in less insane times, but right now, it’s more confusing than ever. (Even more motivation to finally kick this debt to the curb so you don’t have to worry about student loan debt ever again!) So, let’s take a look at how this student loan payment relief extension plays out in certain circumstances.

Loans That Are in Default

If you were in default on your student loans before the pandemic, meaning you hadn’t made on-time payments, this student loan relief extension may be an opportunity to get caught up. With no payments, no interest, and no wage garnishments or collections on federally owned student loans through the end of September 2021, it might be just the right time to push forward while no new payments are coming up on you from behind. Plus, if you’ve had your wages garnished during this time, you can request a refund.

But maybe COVID-19 has meant your hard times have gotten harder. The original student loan relief might be giving you just enough breathing room to pay your rent or keep food on the table. If this is your situation, it’s important to get in touch with your loan servicer as soon as possible to discuss a plan for what your payments will look like if and when the pause ends.

And speaking of plans—if you’ve been putting off making (and sticking to) a budget, there’s no time like the present. If there’s one thing that can take some of the sting out of a stressful time, it’s having a plan for your money. We’ve got a great tool to help you get started.

Public Service Loan Forgiveness

Also included in the student loan payment relief extension are some special callouts for the Public Service Loan Forgiveness (PSLF) program. If you’re seeking PSLF qualification, under the CARES Act, your federally owned student loan payments and interest are waived until September 30. Plus, the months that you aren’t paying on your student loans still count toward the 120 monthly payments needed to qualify for debt forgiveness, as long as you’re still working full time for an eligible employer.

Real talk: The PSLF program has more hoops and hurdles than a horse show. But if you’re still trying to make it work, make sure to check in with your loan servicer before September 30 to make sure you’re still checking all the right boxes the program requires.

If you’re still working and in a position to keep paying on your student loans, do it. Take advantage of 0% interest and attack your principal. Show it no mercy! Besides, with only 1.7% of people ever qualifying for PSLF, this is not a time to put all your eggs in the government’s basket.4 The sooner you’re out of debt, the sooner your money belongs to you.

Private Student Loans

OK, so if you have student loans, then you’re probably well aware by now that earlier federal relief acts did not include any relief for private student loan borrowers. And this new extension doesn’t either.

But you do still have some options here. Look, it’s highly unlikely any bank or private lender is going to proactively do anything to help you with your loans. So if your finances have taken a major hit during this time, you’re going to have to pick up the phone, call your loan servicer, and ask for help. If they’ve previously offered relief, ask for an extension. Ask if they’ll pause your payments for a period of time or reduce your payment amount.

This is important: If you’re in a position to keep paying on your loans, whatever the amount, then keep at it. Even if you have to scale back temporarily, don’t lose steam at crushing your debt. You deserve a debt-free life!

Commercially Held Federal Student Loans

The new student loan payment relief extension only applies to federally owned student loans. That means no commercially owned FFEL Program loans or Federal Perkins loans are eligible. (If you have a federally owned FFEL or Perkins loan, then you’re good.)

How You Should Pay Off Your Student Loans

You know money stress is terrible. You know that it oozes into every second of every day, robbing you of your peace of mind. This global pandemic may have really pulled the rug out from under you in a big way. But that doesn’t mean you should bury your head in the sand and wait for your student loans to magically disappear. In fact, the more you lean into a plan of action that includes making and sticking to a budget, the more control you’re going to get back. Trust us, your gazelle intensity will be a lifesaver.

So no matter how the pandemic has affected your finances, you can still be working toward your goal to knock out student loan debt for good. The timeline might look a little different than you expected, but stay the course. You got this!

If Your Income Is Stable

If your income is stable and you’re sitting on student loan debt, you’ve got a couple of really good options available to you. The first is to keep on keepin’ on—that is, keep tackling your student loan payments each month. With 0% interest on federally owned student loans, your entire payment is going directly toward your principal. Heck yes! You’re paying those bad boys down faster than ever.

With the debt snowball, you work your debts down from smallest to largest. Here’s how that plays into your second option. If you’ve got other smaller debts you’ve been paying the minimums on, you can take your monthly student loan payment and start knocking out those smaller debts while your student loan payments are paused.

If you take the second option, you must keep a debt-attacking mindset. Yes, your student loans are paused through Sept. 30, 2021, but they aren’t gone! Take advantage of this time to wipe out smaller debts and then immediately return to paying off your student loans.

Remember, your student loan payments have been automatically paused. You must make arrangements each month to make a payment. Sure, it’s a little bit of a hassle, but it’s totally worth it!

If Your Income Is at Risk

Maybe you’ve been furloughed, maybe you’re self-employed or a small business owner, maybe you’ve got a baby on the way—whatever the case may be, don’t let financial uncertainty derail you. If your income is at risk or you know your expenses are going to change in a big way (hello, new baby), your job is to stockpile money.

If you’re on Baby Step 1, get your emergency fund up to $1,000 as fast as you can. If you’re on Baby Step 2 and you can keep paying all your minimum payments, including your student loans, do that. But stash any extra funds you have each month. Have $10 leftover in your grocery budget and $30 in your gas budget? Put that $40 into your emergency savings pronto.

Here's the deal: When it comes to student loans, during this extension, technically your minimum payment is zero. So if you’re really starting to feel the pinch or think the pinch is coming, then hit pause on your student loan payments and sock those funds away.

Whether you keep paying on your loans or pause, remember, this is only temporary! As soon as the dust settles, start paying down your debt again with a vengeance.

If You Lost Income

OK, take a deep breath. Let’s stay focused. You’re going to be OK. If you or your spouse lost your job or your income has gone down, then priority number one is making sure your Four Walls—food, utilities, shelter and transportation—are taken care of. If there’s anything left over, save it. Pause your debt snowball. There’s no penalty if you skip your federally owned student loan payments through the end of September. Use that money for your Four Walls. If you have private student loans, call your loan servicer ASAP and ask if they’ll pause your payments or work with you on a reduced payment plan.

Remember, this isn’t a forever situation. Stay calm and stick to the plan. As soon as your income goes back up, resume attack mode on that debt.

Should You Consolidate or Refinance Your Student Loans Right Now?

Nothing like a global pandemic to motivate you to get your priorities in order, right? While the CARES Act and the student loan payment relief extension can help you catch your breath, and maybe even get ahead, don’t miss an opportunity here to nab yourself some better terms on your student loans. Plus, these friendly extensions of relief only apply to federally owned student loans. That means business as usual for your private student loans.

If you’re like most borrowers and you’ve got more than a handful of student loans floating around out there, it might be time to consolidate and refinance your loans so you only have one payment (with better terms) to deal with each month. But refinancing is not for everyone.

You should only refinance your student loans if:

  • It won’t cost you anything to refinance them.
  • You can get a fixed interest rate instead of a variable rate.
  • Your new net interest rate is lower than your current net interest rate.
  • You don’t sign up for a longer repayment period.
  • You don’t get so relieved by the thought of a single payment that you lose your motivation to pay off your debt fast!

Depending on the types of loans you have—federally owned, privately owned or a mix of the two—refinancing could help you get out of debt faster. If you have a mix, holding off on refinancing any of your federal student loans makes sense. But this would be a great time to refinance private loans because (sad to say) the government can’t help you with those. You can always refi the federal ones when interest starts accruing again. Find out your new estimated rate in a few minutes.

Get Rid of Student Loan Debt

Truth bomb incoming: An extension is not an excuse to put off planning for a debt-free life. Don’t wait until September to come up with a strategy to pay down your student loan debt. Do it now. As in today. And don’t rely on the government to figure out a solution for your debt. You see how many unanswered questions there are—take control of your money and your future.

If you’re financially able to continue attacking your student loan debt, then don’t slow down now. You’ve got some great opportunities to make the extension work even harder for you. But if you’re just getting started or the pandemic has forced you to slow down your debt snowball, it’s time to really focus. You don’t have to waste decades of your life trying to get out of student loan debt. Instead, get Anthony ONeal’s Destroy Your Student Loan Debt, a step-by-step plan for paying off your student loans faster. Dump your debt so you can live a life of freedom. 

Ramsey Solutions

About the author

Ramsey Solutions

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners.

Get Rid of Your Student Loans Faster!

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Get Rid of Your Student Loans Faster!

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Get Rid of Your Student Loans Faster!

Find a new, lower interest rate in about 10 minutes.
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