Federal Student Loan Forbearance During Covid-19

Post authored by: Shannon Luschen

In the United States today, 44.7 million Americans hold student loan debt. This equates to roughly $1.71 trillion in total U.S. student loan debt.[1]  With the ongoing pandemic, those of us with student loan payments began to panic over how we were going to continue making payments in these uncertain financial times. Fortunately, the U.S. government stepped in and offered debtors some temporary relief, specifically:

  • On March 20, 2020, the federal government decided to suspend loan payments, stop collections on defaulted loans, and offer a 0% interest rate for federal student loans on a temporary basis.
  • Later, on March 27, 2020, the CARES Act was passed which extended the above measures on all federal student loans through September 30, 2020.
  • When it became clear the pandemic wasn’t slowing down, the federal government decided to extend these measures once again through December 31, 2020, and then again through January 31, 2020.
  • On January 20, 2021, President Biden’s Inauguration Day, these measures were extended yet again via executive order through at least September 30, 2021.[2]

*It is important to note that these measures apply only to federal student loans and not private loans.

So, what can debtors do during this forbearance period?

While this student loan forbearance will continue, interest free, through at least September 30, 2021, those of us with student loans will eventually have to start repaying again. Debtors can certainly choose to continue suspending payments towards their student loan balance without fear of penalties or interest accruing.  This suspension allows individuals to pay down other debt, contribute to savings or otherwise offer peace of mind during these uncertain times.

However, debtors may also choose to make manual payments anyways, at any amount. This means that a debtor may make a partial payment during this period without being penalized for not making the full payment.  If an individual elects to make payments, the payments shall be first applied towards any existing interest accrued prior to March 13, 2020 and then afterwards, directly towards paying down the principal. This could be a great opportunity for debtors to pay down a portion of their overall balance, if financially able, before monthly payments resume.

Unfortunately, this student loan relief won’t last forever. When it does finally end, its important that debtors become aware of when repayments begin again so that they can plan their finances accordingly.  In the meantime, those of us with student loans can hang on to some hope that President Biden will offer some student loan debt forgiveness in the future. Until then, enjoy the forbearance period while it lasts!

[1] https://studentloanhero.com/student-loan-debt-statistics/ (accessed April 16, 2021)

[2] https://studentaid.gov/announcements-events/coronavirus (accessed April 16, 2021)

About The Author:

Shannon Luschen is an associate with Feinberg Sharma in Chicago, which focuses exclusively on family law matters. Shannon received her undergraduate degree at the University of Wisconsin-Madison undergrad and her J.D. at Chicago-Kent College of Law, where she graduated cum laude.

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