The U.S. Department of Education (ED) made the announcement on Dec. 22.
But this isn’t the first time the pause has been extended.
The federal student loan payment pause started in March 2020 with the passing of the CARES Act. Since then, people haven’t had to make loan payments to outstanding federal student loan balances, and no interest has accrued during the pause.
Originally slated to expire September 2020, the pause was extended through:
- December 2020
- January 2021
- September 2021
- Jan. 31, 2022, and
- May 1, 2022.
Payments, interest rates
The pause was enacted to give people some relief from the financial pressure placed on them from the pandemic. But what will happen when the pause is over?
If the new extension is the final one, then your employees who have student loans should be ready to pay back their loans come May. But payments will stay on the original payment date borrowers had been paying before the pandemic. So, if their payment was always made in the middle of the month, then they’ll make their first payment in mid-May.
You might want to recommend, however, that your employees check with their loan servicer just to make sure their payment date is staying the same.
As for interest rates, you can let your people know they’ll have the same rate they had before the pause was implemented.
Get ready now
What advice can you give people in the meantime?
First off, advise them to act as if this is the final extension – because it very well could be. Then have them contact their loan servicer to make sure they have the most up-to-date contact information, especially if they moved during the pandemic. They don’t want anything getting lost in the mail.
Also, if they had autopay before the pandemic, have them check with their loan servicer to make sure it will resume. If they didn’t have autopay before, suggest they investigate it. Some lenders give interest rate reductions because borrowers are less likely to miss payments with autopay.
Remind them the best time to get their budgeting ducks in a row is now. Have them figure out what type of payment they’ll be able to fit into their monthly budget.
You could also survey employees who have student loans to see if they’re feeling stressed about resuming payments. If they are, you could always suggest an app that’ll help them with budgeting, hold a virtual class on budgeting or hook them up with a financial advisor.
It’s likely that their expenses have changed over the pandemic, and they’ll appreciate the help.