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Student Loan Relief Is Ending in 2022: Are You Ready?

Student loan relief is making headlines again because—you guessed it—the government extended paying back student loans. Yep. Again. And that makes everyone wonder if the government could eventually wipe out all student loans for good. But . . . no one knows that answer yet. What we do know is that in April 2022, the government extended student loan relief again.

Now, you might be sitting there thinking, Hooray! No student loan payments for me yet!—but hold up. Even though the deadline has been extended (for the sixth time, but who’s counting?), the clock is winding down here fast.1 So, if you haven’t been paying on your student loans for the last two years, now’s the time to get your budget ready for when those payments start back up again. We’ll dive into all the reasons why, but first, let’s dig into what’s going on with student loan relief.

When Will Student Loan Relief End? 

Student loan relief will end August 31, 2022.2 This means that after more than two years of paused payments and no interest, regular payments will start up again. And guess what? The time to get ready for it is now.

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Biden’s latest student loan relief extension also includes a “fresh start” for borrowers who have federal student loans in default. These folks will be able to start the repayment process back in good standing. But when that day is exactly, no one knows.3

What Is the Student Loan COVID Relief Extension?

Back at the start of the COVID-19 pandemic in March 2020, the U.S. government stopped interest from stacking up on student loans and paused monthly payments. People who had lost their jobs or were furloughed were having a hard time making ends meet, so the government put off student loan payments (and interest!) in an effort to make things easier on folks. As time’s gone by, our economy and job growth have had ups and downs, and the student loan COVID relief has stuck around.

Will Student Loan Relief Be Extended Again

Well, this latest extension just kicks the can down the road for several more months (August 31, remember). But will student loan relief be extended again in the fall? No. Yes. Probably. Who knows. The U.S. Department of Education always says that the current student loan COVID relief extension will be the last (we’ll believe that when we see it).4 Student loans have been on pause since the CARES Act passed back in March 2020. This latest student loan extension is the sixth time it’s been extended—so who knows if this will be the last we see of it.

In March 2022, a group of Democratic lawmakers asked President Biden (again) to cancel student loan debt completely and extend student loan relief through the rest of 2022.5 Still, don’t bank on it being extended again or even totally canceled. Instead, just keep paying on your loan like usual.

How to Prepare for the End of Student Loan Relief 

The good news here is you now have almost five months to prepare before student loan relief ends on August 31, 2022. So there’s really no excuse to be shocked and surprised when those payments hit again just before Labor Day. This is your heads upBut the great thing is, you’ve got plenty of time to get your plan of action ready.

Start Paying Back Your Student Loans Now 

The best thing you can do to prepare for the end of student loan relief is to start making those payments right now. We know—this sounds pretty weird. Why should you pay your student loan payments if they’re on pause? Because the interest alone will eat you alive. And right now, you can keep making those payments and not pay any interest. None. Zip. Zero. Nada. Your payment goes directly toward knocking down the principal amount—that’s huge. So now’s the time to keep up with the payments and make some serious progress on paying toward your student loans!

Sadly, our State of Personal Finance study found that 6 in 10 people who have student loan debt haven’t made any payments on their loans while payments have been stopped during the pandemic.

But how would someone who kept making payments this whole time stack up next to someone who didn’t? Take a look:

Let’s say your student loans add up to the average student loan debt of $38,792.6 You’ve also got the average interest rate of 5.8%, and your minimum payment each month is $393.7,8 If you haven’t made any payments since March 2020, the good news is, your loan hasn’t gotten any bigger (thanks to no interest). But the bad news is, your loan is still sitting at nearly 40 grand. It’s two years later and you’ve made no real progress.

If you kept paying the minimum payment on a student loan balance of $38,792 over the last 25 months, your balance would look a whole lot different now. In fact, you’d be sitting under the 30K mark at $28,967. That’s nearly $10,000 you would have paid off in the last two years with no interest!

There’s no shame here, though. You can’t go back and live in the past. All you can do is make better decisions in the future. If you haven’t been paying on your student loans for the last two years, this is your wake-up call. Now’s the time to get back on the horse and see how much progress you can make on your student loan debt by the time summer is over.

Paying that $393 minimum payment now will lower your student loan by the time the interest kicks back in once August 31 rolls around. So when the interest does start again, you’ll be paying 5.8% on a smaller total loan balance!

Budget for Your Student Loan Payment 

If you haven’t been paying on your student loans since early 2020, now’s the time to start getting your budget ready to handle that $400 payment again. That might mean you need to buckle down and stop the impulse buys, cut back on eating out, or give up your 15 beloved streaming services (yeah, those suckers add up real fast). There are plenty of ways to cut back and free up some extra cash in your budget—you just have to look for them.

If You Have Other Types of Debt Plus Your Student Loan Debt 

With the debt snowball, you pay off your debts from smallest to largest. So, if you have other debts (like a car loan) that are less than the amount of your student loan debt, you need to focus on paying off those small debts first while still making the minimum payment on your student loans.

Here’s how that debt snowball plays out: Once you totally pay off a debt, take the amount you were paying on it and add that to the amount you’ll pay on the next debt. You’re adding to your snowball and packing it with more cash to knock out your debts one by one as you go.

If You Only Have Student Loan Debt 

If you’re in Baby Step 2 (pay off all debt except the house) and the only debt you have is this student loan, then you need to get serious about paying it off. Don’t keep it around like it’s a pet. Get rid of this thing as fast as you can. That means you should pour any extra money you’ve got onto this pile of debt until it’s out of your life for good.

Make Sure Your Information Is Correct 

This feels like a weird thing, but if you haven’t paid on your student loans in almost two years, you’d better make sure your loan servicer has your correct information. A lot can change in two years. Did you get married? Change your last name? Move to a new place? It’s a good idea to double-check that your loan servicer has all your correct info on hand before that first payment is due.

On top of that, make sure you know who’s servicing your loan now, because it might have changed in the last two years. For example, Navient isn’t servicing federal loans anymore.9 All of their loans are now handled by Aidvantage.

Should I Apply for Deferment/Forbearance or Income-Based Repayment?

If you think you’ll have trouble making student loan payments when they kick in again, forbearance and income-based repayment are two popular pieces of “advice” folks will give you. But that doesn’t mean they’re good advice. Our documentary Borrowed Future dug into this to expose the dark side of the student loan industry. Here’s the truth they don’t want you to know:

Deferment/Forbearance

Applying for things like deferment or forbearance on your student loans might feel like a Band-Aid to help you out, but it doesn’t fix the problem. All it does is delay things—aka keep you in debt even longer. Plus, your student loans will keep growing interest even while they’re in deferment or forbearance. That just means your problem will keep getting bigger and bigger.

Income-Based Repayment

These income-based repayments might look nice at first with their promises of a shiny, new lower monthly student loan payment. But not so fast. They also drag out your loan for way longer. Which means you’ll pay thousands more over time. No thanks!  

Should I Wait for Student Loan Forgiveness to Pay Off My Loans for Me?

Don’t hold off on paying back your student loans because you’re banking on your loans to be canceled. Our State of Personal Finance study shows that 69% of those who have student loan debt think the government will forgive some of their student loans. That’s a lot of folks banking on the government to save the day (never a good idea). But even though President Biden campaigned on that very (massive) promise, it’s been crickets on that front as far as any sweeping cancellation goes.

It’s true that some pockets of loan “forgiveness” have happened. Biden did wipe out $5.8 billion in student loan debt for borrowers with a total and permanent disability.10 Still, it’s clear (for now at least) that the president likes targeted forgiveness instead of making it happen for every single borrower across the board. In fact, he didn’t even mention student loan cancellation at all in his 2022 State of the Union address and even conveniently left it out of his budget for the year.11 If you’re waiting for the government to bail you out of your student loans—don’t.

And what about student loan forgiveness through working for a nonprofit or teaching? Just know that you have to hit super specific requirements before you’ll see that debt taken care of. And you have to keep making payments on your student loans the entire time. If you miss even just one payment, you could disqualify yourself from having your loans forgiven. Yikes.  

On top of all that, there’s no guarantee your application will be approved anyway. In fact, the odds are pretty bad. As of September 2021, a total of 678,373 applications were submitted for loans to be forgiven through public service.12 Out of that, only 442,277 applications met the requirements, and only 9,038 lucky folks were actually approved and granted student loan forgiveness. That means only 2% of those who apply for student loan forgiveness are approved for it. That’s crazy!

Oh, and don’t even get us started on the fluke that was the Navient settlement. That kind of thing definitely doesn’t happen every day.  

Bottom line? Stop hoping for more magical money to come from the sky, and get these student loans paid off so you can move on with your life.

Should I Refinance My Student Loans? 

The simple answer is . . . maybe. Refinancing your student loans could be the right thing for you, but it depends on your specific situation. Here are the only times when we recommend refinancing your student loans:

  • When it’s 100% free to make the change
  • When you can keep a fixed rate or swap a variable rate with a fixed rate
  • When you don’t have to sign up for a longer repayment period
  • When your new interest rate ends up being lower than your current interest rate

Refinancing your student loans could help you gain some major traction to pay off that debt for good. That’s something that can actually help you make progress in the right direction—not just kick the can farther down the road like the government is doing here.

See if refinancing your student loans is the right thing for you—it costs you nothing to apply, and it only takes about 10 minutes. Get your new rate today!

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. Learn More.

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Should I Refinance My Student Loans?

Refinancing your student loans could save you thousands of dollars, and a whole lot of stress. Going from an old loan to a refi is like going from dial-up to WiFi!

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