A welcome holiday surprise came to many Maine families late last month when the Biden administration announced that it would once again extend the federal student loan payment pause.
Student loan borrowers across Maine have benefited from the pause of repayment and interest accrual on federal student loans which went into effect in March 2020. The pause, intended as COVID-19 emergency relief, was set to end on January 31, 2022 but has now been extended by the Biden administration until May 1, 2022. This announcement came just in time for the holidays, giving many students and families another few months before interest begins accruing again and the U.S. Department of Education resumes collections on defaulted student loans.
This extension is welcome news for Mainers still suffering from the economic hardships brought on by the pandemic and for those newly impacted by the Omicron variant. The decision will allow folks to focus on other critical expenses like housing, heat, child care and food during these colder winter months. It’s also an opportunity to create a plan for when payments resume.
Most loans have not accrued interest since March of 2020 when the initial pause was implemented. This will remain the case until payments resume. However, it may be useful to keep a record of your balance before the beginning of the payment pause to ensure that nothing has changed once billing resumes. Unfortunately, if you’ve received a private student loan, this pause does not apply to you and interest will continue to accumulate.
Another key provision of the payment pause was that the federal government suspended its enforcement of previously defaulted student loan borrowers. That means that folks who have defaulted on federal student loans have until May before their wages, tax refunds and Social Security checks may be impacted.
If you are able to continue making payments, particularly while interest is suspended, you should evaluate whether or not that is the right financial decision for you. In some instances, such as for those pursuing public service loan forgiveness or using an income-driven repayment plan, the months of payment pause actually count towards your eventual debt forgiveness. This means it may be better to hold off on making payments until May.
After so many months without navigating the complex system of student loan payments, it will be critical to make sure we know to whom, how much and by what mechanism we need to be making our payments. That’s why my family and I intend to get reacquainted with our student loan service provider and online portal over the coming months.
Federal student loans are collected by loan servicers that are hired by Federal Student Aid. Since these servicers differ, it’s important that your current loan servicer and Federal Student Aid have your most up-to-date contact information. If you aren’t sure who your loan servicer is or if they’ve recently changed, you should log in to the StudentAid.gov portal and look for “My Loan Servicers” to make sure you know who to contact. Reconnecting with your loan servicer to update contact information is also a great time to make sure you know how much your upcoming payments will be, what those interest rates will look like and especially when the due dates are for payment.
For many folks in our community and across the state, adding an additional payment each month isn’t an option. Fortunately, there are income-driven plans that can help you find a more manageable payment, tailored to your unique income situation. You can visit StudentAid.gov’s Loan Simulator to find a plan that’s best suited to your goals and financial situation. As always, if you have any questions or need assistance, don’t hesitate to reach out.
Rep. Maureen “Mo” Terry, D-Gorham, is serving her third term in the Maine House of Representatives. She serves as House Chair of the Taxation Committee. Contact her at maureen.terry@legislature.maine.gov.