U.S. President Joe Biden is joined by Education Secretary Miguel Cardona as he announces new actions to protect borrowers after the Supreme Court struck down his student loan forgiveness plan in the Roosevelt Room at the White House on June 30, 2023 in Washington, DC.
Chip Somodevilla | Getty
Extra protections follow Supreme Court decision
This aid is not another payment pause extension
Former President Donald Trump first announced the stay on federal student loan bills and the accrual of interest in March 2020, when the coronavirus pandemic hit the U.S. and crippled the economy. The pause has since been extended eight times.
The latest announcement by Biden is not another extension of that policy.
Even if the president wanted to prolong the relief, the recent bipartisan agreement to raise the federal debt ceiling included a provision that officially terminates the more than three-year-long pause at the end of August. (Borrowers’ official due date will depend on their loan terms.)
However, borrowers will be spared from many of the usual consequences of missing a payment until October of next year.
For example, loans will not go into default and delinquencies will not be reported to credit reporting agencies, said higher education expert Mark Kantrowitz. Late fees won’t be charged, either.
“The 12-month on-ramp is similar to a forbearance in many ways,” Kantrowitz said.
But as is the case with a forbearance, interest will continue accruing on your debt while you don’t make payments. As a result, Kantrowitz recommends borrowers start repaying their bills, if they can.
“Doing otherwise will eventually hurt them,” he said.
