His first day on the job, President Joe Biden signed an executive order that directed the Education Department to extend its freeze on payments and interest rates for federally held student loans through September 30,2021.
What Does The Forbearance Entail?
The executive order extends the administrative order originating in the CARES Act of 2020. Interest rates will continue to be set at 0%. All payments will remain suspended until the order ends on September 30, 2021.
What It Means For You
If you have a student loan owned by the US Department of Education, including Direct Loans, subsidized and unsubsidized Safford loans, Parent and Graduate Plus loans or consolidation loans, you do not need to make student loan payments until the forbearance ends. You will not be penalized for non-payment, you will not accrue interest during this time.
If your Federal Family Education Loan (FFEL) or Perkins loan is held by the government, you are also included in the forbearance. NOTE: The majority of FFEL and Perkins loans are commercially held. Commercially held loans are not included in the forbearance. Know who holds your loan so that you are not hit with late fees and interest if your loan is not covered by the forbearance. If your loan does not fall under the umbrella of the executive order, you are still responsible for paying your monthly student loan payment.
Under the executive order, collections on defaulted loans has been halted until September 30, 2021. If you receive calls from collections, ensure your loan is covered by the executive order and inform them of their mistake and end the call.
This extension of this executive order is a much-needed reprieve for the millions of Americans who have been impacted economically this past year. With more financial wiggle room, you can budget accordingly!