President Biden
Source: Getty Images

Student Loan Pause Ends Early in 2022—Is There a Grace Period?


Dec. 6 2021, Published 1:36 p.m. ET

When the COVID-19 pandemic started in early March 2020, one of the White House's main concerns was student loan payments. With massive job loss and unemployment, people weren't able to make their student loan payments on time, if at all.

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The CARES Act passed on March 27, 2020, and paused student loans with an interest of 0 percent. Nearly a year and a half later, the pause on student loans will end early in 2022. Here's what you should know and how you can prepare for repayment.

What was the timeline of the student loan pause?

Senator Elizabeth Warren on student loan relief
Source: Getty Images
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As of Aug. 6, the United States Department of Education reported from its press office that the final extension of the student loan pause will end on January 31, 2022. According to the department, the student loan payment pause was intended to reduce the risk of payment delinquency and defaults.

The U.S. Secretary of Education, Miguel Cardona, said,“...This final extension will give students and borrowers the time they need to plan for the restart and ensure a smooth pathway back to repayment. It is the department’s priority to support students and borrowers during this transition and ensure they have the resources they need to access affordable, high-quality higher education.” The department has been notifying all of the people by email who will be impacted by the extension ending and providing options for repayment.

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The final extension was followed by a previous extension enacted in January 2021 that extended the loan pause from Jan. 31 to Sept. 30 of 2021. During the pause, all payments and collections were kept at an interest rate of 0 percent. White House statements and release page stated that Americans “...Should not be forced to choose between paying their student loans and putting food on the table.”

Will there be changes ahead of student loan repayment?

Source: CNBC

"Federal student loan payment pause set to end in January"

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After the loan pause ends, borrowers will receive their first bill in February 2022. Due to pending changes, any borrower or student should update their personal information with their loan provider to make sure that they receive all of the correspondence pertaining to repayment.

Some loan servicers providers will be leaving the federal student loan system. For example, borrowers who had loans serviced by Navient will be transferred to Aidvantage. FedLoan Servicing borrowers will be transferred to a new loan servicer that hasn't been named yet. All of the other servicers haven't announced yet if they will be leaving the federal student loan system.

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Forbes reported that people who might have been on an income-driven payment plan should check to make sure that they can still afford their previous payment arrangement and if they need to complete income recertification. Navient announced that if a borrower was enrolled in auto-debit pay before the student loan pause, they will have to confirm with their provider that they would still like to be enrolled.

Will there be a repayment grace period?

Source: Twitter

Majority leader Chuck Schumer requests additional pause due to Omicron variant

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Politico reported that White House plans to provide a grace period as debt holders start to make payments again, although the specifics haven't be announced. The Department of Education noted that “borrowers will be allowed additional flexibility in the early stages of the return to repayment.” The department also plans to provide additional assistance to those who were in default or delinquent on a loan before the pandemic, this includes making it “significantly easier for borrowers to enroll in income-based repayment programs.”

CNBC reported that while loan repayments are resuming, it's possible that broader loan forgiveness will be included in the Democrat spending bill. President Biden has shown support for canceling $10,000 in loans, but he's being urged to raise that amount to $50,000. Canceling $10,000 would reduce the country’s education loan debt from $1.7 trillion to $1.3 trillion and 33 percent of borrowers would see their balance drop to zero. Conversely, canceling $50,000 would drop debt to zero for 80 percent of borrowers.

Conversely, canceling $50,000 would drop debt to zero for 80 percent of borrowers. It would also reduce the country's education debt from $1.7 trillion to $700 billion. While Biden has previously enacted loan forgiveness, only 1 percent of borrowers benefited. Needless to say, it falls short of the broader loan forgiveness plan that some Democrats are pushing for. Whether or not loan forgiveness is on the horizon, borrowers are still encouraged to take the necessary steps to prepare for loan repayment after the pause ends on January 31, 2022.


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