The student loan pause has been extended again. What that means for NC borrowers
Federal student loan repayments have once again been paused, the White House and U.S. Department of Education confirmed Wednesday, giving borrowers more time before they again have to make payments on their loans.
The pause, which began in the earlier days of the pandemic as a means of assisting borrowers financially impacted by COVID-19, had been slated to conclude at the end of the month.
Although not all student loans are included in the pause, the move does cover millions of Americans, including many in North Carolina. And, the Department of Education said Wednesday, additional relief is also coming for borrowers who’ve defaulted on their loans.
Whether or not student loan forgiveness is possible in the current political landscape remains in question.
Here’s what North Carolina borrowers need to know:
Which student loans are paused?
This latest extension will continue “the pause on student loan repayment, interest, and collections through August 31, 2022,” the Department of Education said in a Wednesday statement.
That means if you have federal student loans, you don’t have to make payments until the end or summer, and interest won’t be accruing on your balance. Most parent PLUS loans and Perkins loans that are held by the Department of Education are also included in the relief.
Private student loans are not included in the federal forbearance.
If you’re struggling to make payments on a private student loan, you should contact your loan servicer to see what assistance options are available.
What about borrowers in default?
Borrowers whose federal student loans are in default have been included in the pause, which first began in the early stages of the pandemic, and the federal government has also stopped collections on defaulted loans as part of the pause.
The Department of Education also said in Wednesday’s statement it will allow “all borrowers with paused loans to receive a ‘fresh start’ on repayment by eliminating the impact of delinquency and default and allowing them to reenter repayment in good standing.”
How much student loan debt do North Carolinians have?
Student loan debt is a major issue in North Carolina, data shows.
More than 60% of North Carolina students — whether they attend a public or private college — will graduate with student loan debt, according to the state Department of Justice. And the average borrower in North Carolina “owes more than $25,000.”
About 92% of all student loan debt in the U.S., according to the academic data firm MeasureOne, is federal, meaning a significant portion of those North Carolina borrowers are impacted by the extended repayment pause.
What should you do with money that would normally go towards your student loan?
If you were already budgeting to resume making student loan payments, there are things you can do to put that money to work during the extended pause.
For one, you can go ahead and make payments on your federal student loans. Because interest is not accruing during the forbearance period, 100% of your payments will go towards paying down your principal balance.
You can also put the money that would normally go towards your federal student loans into a savings account or emergency fund, invest the money or use it to pay down other debts.
Now is also a good time, the Department of Education says, to look into your eligibility for existing loan forgiveness programs.
Will student loan forgiveness happen?
Even though the pause on student loan payments has been extended, they will resume eventually, raising the question again of whether the federal government will forgive some or all federal student loan debt.
It’s a question that, for now, has no clear answer.
President Joe Biden has in the past supported some forgiveness proposals, but he hasn’t included broad-scale loan forgiveness in his major legislative pitches. And Republican congressional leaders have said potential future proposals would face an uphill battle.
Some forgiveness advocates have said Biden should use executive orders to address the issues, but others, including Biden himself, have questioned the legality of that idea.
This story was originally published April 7, 2022 at 9:00 AM.
