President Biden gave student loan borrowers a holiday gift recently by extending the moratorium on student loan payments and collection from January 31, 2022, to May 1, 2022. You may be breathing a sigh of relief, but as many borrowers have already figured out, this doesn't help everyone. In fact, it's rather limited.
It's Only a Direct Student Loan Forbearance
The reason for this is that the suspension of payments only applies to people who have federal Direct Loans from the Department of Education, as opposed to those who borrowed under the Federal Family Education Loan (FFEL) program, which ended on June 30, 2010, or under the Perkins loan program. If you have FFEL loans in default, though, you may benefit from the suspension of collection efforts, such as wage garnishments.
A recent article stated that there are 11 million FFEL borrowers (and 6 million Perkins borrowers), but only 3 million of them are in default. This equates to about $180 billion in federal loans that are unprotected. Also, if you have private loans (or state sponsored ones like New Jersey's CLASS loans), you are out of luck.
There's a Better Option Than Waiting
The fact of the matter is, when it comes to federal loans of any kind, there may well be a better option than waiting out a federal forbearance. If you are in default, now is the time to get out, while you still have breathing room, and the feds aren't trying to collect.
Also, if you are unemployed, or underemployed, you should really get started on an income driven repayment plan before May 1 that will give you an affordable, long-term solution to your student loan problem. Under many income driven repayment plans, if your income is low enough in comparison to your total loan balance, it's possible to have a payment of $0.00.
Get a Student Loan Repayment Plan Now!
The best way to start off 2022 is with a student loan plan. If you live in New Jersey, have federal student loans that you need to repay, and have decided not to wait four more months to do something about it, then call my office right away at 856-432-4113 to schedule an analysis session with my office. Start off the new year right!
