Student loan stimulus: Freeze on payments, interest extended thru Jan. as COVID-19 cases surge

Student loan borrowers won’t have to make payments until the end of January, the U.S. Education Department said Friday, extending a pandemic-era reprieve through the first days of the Joe Biden presidency.

The extension also continued a pause in interest on loans and in collections on delinquent loans through Jan. 31, said a news release from the department.

President Donald Trump’s Education Department first paused debt payments on federal student loans in March, as the coronavirus pandemic ravaged the U.S. economy. In August, officials extended that suspension through December. Now, the pandemic pause will last until Biden and his administration have taken over.

Those who want to make their payments can still do so. They will benefit from a 0% interest rate as they pay down principal, which may allow some borrowers to pay off their loans more quickly.

Over the past several weeks, borrowers and student loan companies had grown increasingly concerned about the approaching deadline amid the ongoing recession.

Borrowers have saved about $7 billion a month in student loans since the pandemic started, the Federal Reserve Bank of New York and Bank of America said in November.

“The coronavirus pandemic has presented challenges for many students and borrowers, and this temporary pause in payments will help those who have been impacted,” Education Secretary Betsy DeVos said in the announcement.

Punting payments another month comes as COVID-19 stimulus talks continue in Congress. Pausing student loans is one of the many financial measures lawmakers have considered to ease the financial burden caused by the coronavirus.

But forgiving student loan debt is also something on the table, especially for the Biden administration. Some members of Congress are urging the president-elect to cancel up to $50,000 of student loan debt per person via executive order.

Friday’s extension in student loan relief, DeVos said, “allows Congress to do its job and determine what measures it believes are necessary and appropriate.”

“Congress, not the Executive Branch, is in charge of student loan policy,” she added.