Update: The federal government will erase student loan debt for 323,000 Americans who have total and permanent disabilities. Starting in September, the U.S. Department of Education will automatically discharge more than $5.8 billion in student loan debt owed by these borrowers, who will be identified through a data match with the Social Security Administration. Click here for details from the Department of Education website.

The government-mandated pause on federal student loan repayments, interest, and collections—set to expire at the end of September—has been extended until Jan. 31, 2022.

The Department of Education made it clear this would be the “final pause” for the 43 million Americans who are paying off their federal student loans.

Listen to audio highlights of the story below:

In a news release announcing the decision, the agency said, “a definitive end date will allow borrowers to plan for the resumption of payments and reduce the risk of delinquency and defaults after restart.”

Congress authorized the payment moratorium on federal student loans when it passed the CARES Act in March of 2020. The law stopped interest from accruing and prevented debt collection efforts.

President Biden said the additional four-month pause will give the government and borrowers “more time and more certainty” as they prepare to restart student loan payments. “It will also ensure a smoother transition that minimizes loan defaults and delinquencies that hurt families and undermine our economic recovery,” Biden said.

The department said it will contact borrowers to notify them about the extension and provide resources and information about how to plan for the resumption of payments. (Note: The moratorium does not apply to private loans, only federal student loans.)

Kyra Taylor, a staff attorney with the National Consumer Law Center (NCLC), said the extra time helps borrowers in several ways.

“These [additional] months will still count towards income-driven repayment plans and public service loan forgiveness,” Taylor told Checkbook. “This also means that for borrowers in default, they will not face involuntary collections like wage garnishment, tax refund offset, etc., until after the payment pause is over.”

Secretary of Education Miguel Cardona said the extended payment moratorium is one of several steps being taken by his department to support students and borrowers, make higher education more affordable, and improve student loan servicing. These actions include:

  • Approving $1.5 billion in borrower defense claims, including extending full relief to approved claims and approving new types of claims.
  • Reinstating $1.3 billion in loan discharges for 41,000 borrowers who received a total and permanent disability discharge and protecting another 190,000 from potential loan reinstatement.
  • Helping 30,000 small business owners with student loans requesting help from the Paycheck Protection Program.

Prepare Now for Next Year

Many families continue to struggle with financial problems caused by the pandemic. If you paid $393 a month pre-pandemic (the average monthly student loan payment), will you have that money in February? Look at your budget to see if there’s enough disposable income to resume payments. If not, now is the time to make some adjustments in your spending.

Don’t have a budget? NerdWallet has free budget planner worksheet on its website. Remember: Failure to make student loan payments can lead to serious financial consequences.

For those who know they won't be able to repay, NCLC suggests enrolling in an income-driven repayment plan now, before payments resume. The U.S. Department of Education offers four income-driven plans where the monthly payments are based on income and family size. The Department’s Loan Simulator can help you choose the loan repayment option that’s best for you.

What if You Can Afford to Pay?

Borrowers can continue to make payments during the extended relief period, and that might make sense for those who can afford it, according to the financial advisors at GreenPath Financial Wellness, a national non-profit credit counseling agency.

Paused student loans are not accruing any interest, so your full payment will be applied to the principal and not the interest. By reducing the balance, you’ll pay off the loan faster, which reduces the total amount of interest paid over the life of the loan.

If, on the other hand, you’re planning to use an income-driven repayment plan—where you can get cancellation after 20 or 25 years, depending on your plan and the types of loans you have—the smart move may be to take advantage of the pause.

Check Your Account

The financial relief offered by lenders during the pandemic resulted in a variety of reporting problems, so it’s a smart move to check visit StudentAid.gov and your loan servicer’s website to make sure everything is accurate, including payment information if you plan to resume auto-pay when the pause ends.

Next year, when payments resume, check your credit files at the big three credit bureaus (Equifax, Experian, and TransUnion), by going to AnnualCreditReport.com. You can get a free copy of your reports once a week through April 2022. Make sure there are no negative comments, such as “late payment,” for taking advantage of the CARES Act relief. If there are, you’ll need to challenge it.



Contributing editor Herb Weisbaum (“The ConsumerMan”) is an Emmy award-winning broadcaster and one of America's top consumer experts. He is also the consumer reporter for KOMO radio in Seattle. You can also find him on Facebook, Twitter, and at ConsumerMan.com.