Students and borrowers have a new and latest extension of federal student loan relief.
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George Milton / Pexels
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President Joe Biden signed an executive order that extends the forbearance of student loans until January 31, 2022. This means that those borrowers who have any of these federal products, can not worry about their student loans accruing interest throughout this lapse. But the initiative goes beyond that, so We explain to you what are the benefits of this new relief.
It’s the ultimate indulgence
During the announcement of the extension of the student loan relief until January 31, 2022, the Biden administration made it clear that it is the official end of this benefit. Namely, Americans should not wait for a new leniency at the end of this, so they have to prevent themselves to start or finish paying their federal student loans as of February 1, 2022. And this decision has no turning back regardless of the conditions of the pandemic, the country’s economy or any other circumstance.
But there could be another kind of improvement in student loans
Although nothing is official in this regard, the US Department of Education will work between now and February to improve student loans, especially in look for benefits of student loan repayment, student loan forgiveness, and student loan cancellation. This could mean simplifying the repayment of federal student loans, ensuring that more borrowers with these products qualify for the public service loan forgiveness program, and proceeding with the specific cancellation of student loans.
The Department of Education may not solve all the problems around student loans in the next six months, however, it could advance its goals of transparency, reducing application red tape and helping borrowers comply with their responsibilities without so much affectation.
Borrowers to get $ 110 billion in temporary cancellations
According to the Department of Education, from March 2020 to January 31, 2022, borrowers of these types of loans will have received more than $ 110 billion in temporary cancellations of federal student loans. According to data from the government agency, borrowers get $ 5 billion a month in savings as a result of student loan relief due to the Covid-19 pandemic.
The temporary forbearance of mandatory federal student loan payments and the temporary 0% interest rates on these products have allowed borrowers to save up to $ 110 billion in payments. In the end, it would mean that borrowers have enjoyed 22 months of no new interest or student loan payments.
It must be taken into account that the cancellation is specific around the fact that no interest is generated in the absence of payments on student loans and not in terms of the balances they have. In this sense, the majority leader in the Senate, Chuck Schumer, senator from New York, and the senator for Massachusetts, Elizabeth Warren, lead an initiative to cancel the student debt for $ 50,000 dollars, although at the moment it has not been discussed in the full.
The relief does not extend to private student loans
The federal government owns 92% of all outstanding student loans, so its political efforts have focused there. But nevertheless, this excludes private student loans, which are owned by lenders, financial institutions, investors and other third parties.
At the start of the Covid-19 pandemic, many states across the country helped private student loan borrowers get some relief with initiatives similar to the federal ones. For its part, private institutions not oblivious to the circumstances, also provided their own support programs so that borrowers had some kind of temporary forbearance to all those who contact their offices and so require.
Today, although there are still private student loan servicers that provide some financial support for those who need it, fewer and fewer financial institutions do so. It’s a matter of borrowers reaching out to their lender to find out what options they have for dealing with debt.
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