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Welcome back, readers!
It’s 2022, and those with federal student loans can start the new year off with a sigh: The US Department of Education has made some changes that can help borrowers financially throughout the year.
First, the Education Ministry’s moratorium on loan repayments, interest and collection remains in effect through May 1, as do wage trappings for those who default.
In December, the administration extended the pause (which was originally set to end on February 1) due to the omicron variant contagious to the coronavirus. The decision was made to give borrowers additional time to “plan for resumption of payments and reduce the risk of late payments and defaults after the restart.”
The halt – in effect since March 27, 2020 – has been a savings boon for some borrowers, allowing them to redirect hundreds of dollars in monthly payments to necessities, such as housing, food or savings during the pandemic.
In addition to the extension of the payment pause period, some borrowers who qualify for Public Service Loan Forgiveness (PSLF) have until October 31, 2022 to take advantage of the changes to the PSLF programme, announced by the Ministry of Education in October last year.
These temporary changes include offering a retroactive FFEL account waiver, or Federal Family Education Loans, in exchange for the 120 required payments for the PSLF; Count any prepayment made as eligible against the required 120 as long as the borrower has a direct loan; And automatically certify employment for federal employees and military members.
This does not mean that anyone can apply now – borrowers still need to work for eligible employers and make their 120 monthly payments on time for their loans. But the changes ensure that borrowers who have worked in public service jobs but are confused by the program’s complex rules can now qualify.
Borrowers can find more information about the changes on the Department of Education’s website.
Finally, some borrowers are still making their payments during the layoff because with interest rates set at 0% for the duration of the pandemic, it all goes toward their principal balance. For those who want to outpace some interests, this can be a good tactic.
However, if you are seeking forgiveness, don’t make any payments now. The pause months still count toward the total number of payments you need to qualify for forgiveness (i.e. 120 for the PSLF, for example), but it’s not worth putting more money into your loans now if they eventually get forgiven.
What is on your mind in the new year? Send me an email to firstname.lastname@example.org.
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