Who qualifies for Biden’s most recent student loan relief

Last week, President Biden announced new relief for student loan borrowers, including an extension of deferrals and accrued interest, as well as new relief for non-paying federal student borrowers. Here’s what you need to know.

Biden extends student loan deferral and interest freeze: Who qualifies

Last week, Biden announced a four-month extension of the ongoing suspension of payments and accrued interest associated with Covid-19. The moratorium on student loan payments and interest rates has been in place for more than two years at this point after multiple previous extensions by both President Trump and President Biden. The most recent extension was scheduled to expire on May 1st. Biden’s latest extension sets a new expiration date of August 31, 2022, but there is a clear possibility the extension will be extended again.

It is important to note that only state federal student loans are covered by deferrals and interest freezes. This includes all direct federal student loans, as well as a portion of government-owned Family Federal Education Loan (FFEL) loans. The FFEL program, which was discontinued in 2010, involved commercial lenders issuing federally backed loans (as opposed to loans issued directly by the government). FFEL loans that remain privately owned are not covered by default and interest, but FFEL loans subsequently acquired by the Ministry of Education qualify for this relief.

Similarly, Perkins federal loans – which are federal loans issued directly by colleges and universities – have also not been covered by layoffs because they are not controlled by the government. But some Perkins loans taken out by the Department of Education may be eligible.

Unlike most other types of deferrals and tolerances, the months of suspension payments under Covid-19 will continue to be counted in student loan write-off programs, including the Public Service Loan (PSLF), as if payments were being made (with any other eligibility criteria are met). Other procrastination and tolerance programs usually do not qualify.

Biden extends student loan defaults for defaulters: Who qualifies

Tolerance for Covid-19 also includes a moratorium on collection efforts against borrowers who default on their federal student loans. Prior to the tolerance, federal lenders and the US government used powerful recovery tools against defaulting borrowers, including payroll, tax evasion, and federal benefits such as Social Security. Federal lenders or debt collectors did not have to go through the judiciary to engage in these so-called involuntary collection activities, as federal law allows for “administrative” action (meaning no formal action or court order is required).

Initially, the suspension of Covid-19 collections only applied to federal student loans held by the government, such as the cessation of payments and the freezing of interest rates. Last year, however, President Biden extended the moratorium to include collection efforts against borrowers who defaulted on FFEL loans. These benefits will continue with Biden’s most recent extension.

New relief: New beginning for default borrowers on Federal Student Loans

Biden also included a new form of relief for unpaid student borrowers when he announced the extension of the deferral. Under a new initiative, the Ministry of Education will automatically process federal student loans that are in the default state.

“All borrowers with loans in arrears [will] “Take a ‘new beginning’ in repayment by eliminating the impact of delinquency and default and allowing them to reintroduce repayment in good standing,” the ministry said in a statement last week. This includes defaults on direct federal student loans as well as deferred FFEL loans. About eight million borrowers are expected to benefit.

The Department has not provided a specific timetable for resolving default, but the process is expected to be completed until borrowers resume repayment.

Further reading of a student loan

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