On Tuesday March 30, 2021, the Department of Education announced additional protections for some student loan borrowers. Before we dig into the news, here’s a quick recap:
At this time, all student loans under the “Federal Direct Loan Program” are under an administrative forbearance. This means that these loans are not in repayment and interest is not accruing. The current administrative forbearance extends through September 30th, 2021. Unfortunately, not all student loans fall under the Direct Loan Program. Borrowers who hold FFEL Program loans, Perkins loans, and private loans are still making payments with interest accruing as previously agreed.
The expansion announced on Tuesday provides protection for a subset of seemingly forgotten borrowers. Borrowers with loans under the Federal Family Education Loan (FFEL) Program who are in default will be extended the protections of the current administrative forbearance (0% interest and a pause of collections). The interest rate reduction and collections pause will be applied retroactively to the date of the CARES Act, March 13th, 2020. Credit reports are to be updated to remove the lack of payment during the months since March 2020. Finally, wages garnished and tax refunds seized during this time will also be refunded to borrowers. (Read the full press release here.)
Please keep in mind, these protections do not apply to FFEL Program loans in good standing, private student loans, or Perkins loans. It’s not yet clear logistically how wages/refunds will be returned or how long it will take credit reports to be updated. Rest assured, the Your Money Line team will continue to monitor and update this situation.
If you have any questions about these updates or their applicability to your situation please give our team a call.
Damian is the lead Financial Concierge on Your Money Line, the financial help line serving all Pete the Planner® Financial Wellness clients. Damian is a CERTIFIED FINANCIAL PLANNER™ professional and loves answering your money questions. Despite sharing a last name and sense of humor, Damian and Pete are not related.