Important Student Loan Payment Pause Update

Remember back in September when we discussed the student loan forgiveness plan that was approved by the White House? There are some important updates that you need to be aware of. But first, let’s review the plan.

Qualified borrowers are eligible to receive up to $20,000 in one-time student loan forgiveness. To receive the funds, individual borrowers must earn less than $125,000 annually (or $250,000 annually per household), and they must hold federal student loans – privately held student loans are not eligible for relief. Pell grant recipients will be granted relief up to $20,000, while all other borrowers who meet the criteria will receive $10,000.

Now that we have covered the plan details, let’s talk about what’s new.

The relief efforts have been paused due to pending lawsuits. While the courts review the case, applicants will remain in a state of limbo. The good news is that the White House has granted another extension to the student loan payment pause. This one is a little bit different than the payment pause initially introduced during the peak of the pandemic.

Here’s what you need to know.

·         Federal student loan payments were scheduled to resume in January 2023. Due to the pending court case, the payment pause has been extended for up to 60 days following the court’s decision. Example – The court is expected to review the case in February. If the court’s ruling states that the student loan forgiveness program is allowed to resume at that time, relief payments will be issued. Any borrower still holding a balance after that will have 60 days from the decision date to resume their student loan payments. The hope is that a final ruling will be determined in February, but the case could drag out further into 2023.

·         If the program is not implemented or resolved by June 30, 2023, payments will restart 60 days after that. This means that unless something changes, student loan payments will resume no later than the end of August 2023.

·         At this time, no applications are being reviewed or accepted. If, however, you applied after the program was introduced, your application has likely already been reviewed and decisioned. Millions of applicants have already received an approval, pending the final decision from the court. This means that relief can come quickly to those who managed to apply early.

·         Student loan borrowers can expect to receive regular emails from their loan servicer about the status of this program, but you can also bookmark this link for up-to-date information.

Do you have questions about how the student loan payment pause affects you? I want to hear from you. Leave a comment below or email me.

Krista Kyte is a personal finance blogger and personal banker with over 20 years of experience in the financial industry. Krista is passionate about helping our members understand their financial situations. She writes tips that help consumers reach and maintain financial security and start living the life they’ve always wanted.