In response to the economic hardships created by the coronavirus pandemic, the US government has suspended payments and interest on student loans from March 2020. Now that vaccine distribution in the US is widespread and businesses have reopened , many wondered how long the student loan cancellation program would continue. The Biden administration responded to this question in August 2021, announcing a final extension of the student loan hiatus. Here are the details on what it means for those with student loans.
Read: What to do if you can’t afford your student loans
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What exactly is suspended during this student loan extension?
The Coronavirus Aid, Relief and Economic Security Act, or CARES Act, suspended payments and interest on federal student loans. The law also prevented collection actions on delinquent loans and negative credit reports. The extension of the Biden administration continued with the suspension of payments, interest and collections.
See: 9 Ways Student Debt Affects All Aspects of American Lives
How long will this loan suspension last?
The initial suspension of March 2020 has been continuously extended. In August 2021, the Biden administration extended the most recent expiration date of September 2021 as of January 31, 2022.
Why was another extension granted?
The supposedly final end of the extension is intended to provide a concrete date that borrowers and lenders can use to plan for resuming payments. It also aims to reduce the risk of delinquency and payment default. The Biden administration believes that even as the economy recovers, millions of Americans still face challenges from the coronavirus pandemic, and this latest extension will give these taxpayers a little more time to get back on their feet .
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Is this the extension of the final student loan payment?
According to the August 6 announcement from the Biden administration, this will be the last extension of the student loan payment. While that may very well be the administration’s intention, January 31, 2022 is still a long way off. If the economy continues to improve and businesses stay open, you can expect this to be the last expansion. However, if the Delta variant continues to gain momentum and cases skyrocket over the winter, the Biden administration may revisit that policy.
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Do I have to continue paying even if I don’t have to?
If you haven’t returned to work and your cash flow remains tight, it’s probably in your best interest to take advantage of the extended student loan repayment and accumulate as much cash as possible. However, if your life has more or less returned to normal, you might consider continuing with your student loan payments. Since no interest is currently accruing on your loan, the payments you make will go directly to your principal balance, significantly reducing the cost of your loan over the long term.
Read more: 19 Ways to Budget and Manage Your Debt
Does this extension apply to private student loans?
Unfortunately, the moratorium on student loan payments only applies to federal student loans. If you are dealing with a private lender, you are still responsible for payments and interest. If you are unable to make timely payments, contact your lender to see if you can negotiate a suspension of payment. Otherwise, you risk damaging your credit report if you fall behind on your payments.
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Last updated: September 10, 2021
This article originally appeared on GOBankingRates.com: Student loan forgiveness extended until January 2022: What you need to know