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News: Biden Extends Student Loan Freeze, Helps Defaulted Borrowers

The latest student loan freeze extension does more than just stop interest and payments.

Justin Cupler

Contributing Writer at Tally

April 22, 2022

The COVID-19 pandemic created havoc in the U.S. economy, pushing then-President Trump to sign an executive order freezing all student loan payments and interest. When Congress passed the CARES Act, this order became law. 

Over two years after Trump signed the executive order, President Biden renewed the freeze. 

Below, we’ll outline what the freeze covers and doesn’t cover and a new benefit in this latest renewal to help defaulted borrowers. 

Extends student loan payments and interest freeze

The student loan payment and interest freeze has been ongoing since March 2020 and has been extended several times by both the Trump and Biden administrations. The latest extension was set to expire on May 1, 2022, but the new extension pushes this out to August 31, 2022. 

While the COVID-19 pandemic has waned and most activities have returned to relative normalcy in the U.S., there are good reasons for the extension. In the wake of the pandemic, Americans are dealing with soaring inflation. Plus, gasoline prices are continually increasing due to the war in Ukraine. 

This pause will help save borrowers $393 per month on average, according to a letter Democratic lawmakers sent to President Biden. 

Who the payment and interest freeze impacts

The extended freeze covers all government-held student loans, including:

  • Direct federal loans

  • Government-owned Family Federal Education Loans (FFEL) 

  • Perkins loans that the federal government took over

There are no income requirements to meet or any proof of hardship required. 

Borrowers with these types of loans won’t have to make any payments and won’t incur interest charges through August 31. Also, the federal government won’t take collections actions during this time, including:

  • Wage garnishment

  • Income tax refund garnishment

  • Social security benefits adjustments 

Student loans that aren’t covered include privately held FFEL-Program loans and most federal Perkins loans. 

The impact on student loan forgiveness programs

Those in student loan forgiveness programs, such as the Public Service Loan Forgiveness (PSLF) program, have their loans forgiven after a certain number of payments. During the freeze, these borrowers will still get credit toward their payment target each month despite not having to make any payments. 

Huge help for defaulted federal student loans

The big change in this extension is curing all defaulted frozen federal student loans. If your frozen student loan was in default, the Department of Education will automatically bring the account up to date and on time when it’s unfrozen, giving you a fresh start on repayment. 

While there’s no specific time frame for curing defaulted loans, it’s expected to be completed by the August 31 repayment restart date. 

“Additional flexibilities” are coming, but no forgiveness yet

President Biden also announced “additional flexibilities” for borrowers upon the August 31 expiration date. However, he didn’t elaborate on what these may include. Some lawmakers are calling for the widespread cancellation of student debt, but the president stopped short of promising this relief. 


Your options if you struggle with student loan debt

When the student loan freeze lifts on August 31, you may still struggle to make your monthly payment and maintain your budget. Fortunately, there are options to help you through these hardships. 

Income-driven repayment plans

If you can’t afford your monthly payment, the government may offer you a 20- or 25-year repayment plan based on your discretionary income. These payments can be as low as $0 per month and are forgiven after the 20 or 25 years have passed. 

There are four income-driven repayment plans tailored for differing situations: 

  • Revised Pay As You Earn Repayment Plan (REPAYE Plan)

  • Pay As You Earn Repayment Plan (PAYE Plan)

  • Income-Based Repayment Plan (IBR Plan)

  • Income-Contingent Repayment Plan (ICR Plan)

Student loan deferment 

You can also request a student loan payment deferment, which stops all payments for a specific period under certain circumstances. The deferment options include: 

  • Cancer treatment deferment

  • Economic hardship deferment

  • Graduate fellowship deferment

  • In-school deferment

  • Military service and post-active duty student deferment

  • Parent PLUS borrower deferment

  • Rehabilitation training deferment

  • Unemployment deferment

Loans eligible for these deferments include all direct student loans, FFEL Program loans and Perkins loans. 

Get your budget in order before the freeze expires

With only months before what seems like the expiration of the final payment and interest freeze extension, now’s the time to get your budget prepared for the return of these payments. 

If it appears these payments won’t fit your budget, call your loan servicer as soon as possible to review your options, as you may qualify for an income-driven repayment plan or a deferment.