CARES Act Interest and Payment Halt Extended; FedLoans to Exit Servicing
The student loan marketplace continues to dominate headlines, and today we have some welcome news if you haven’t seen it already. In what is being billed as the “final” extension, the Department of Education pushed the expiration of the CARES Act student loan payment and interest moratorium out to January 31st, 2022.
As with the past extensions, we expect this “administrative forbearance” will continue to count towards both PSLF and Income-Driven Repayment forgiveness. Therefore, we see no reason for borrowers of federal student loan debt to make voluntary payments during this time. Additionally, borrowers won’t be expected to recertify their Income-Driven repayment plans until next year as well. Unless you’ve experienced a loss or reduction of income, there’s no need to take action.
No doubt, the overall economy is in recovery; in some ways this extension goes against this reality. While millions of borrowers still need relief on their student loan debt… many millions don’t.
So why the blanket extension versus need-based relief?
FedLoans Will Not Renew Contract with Department of Education
We believe one of the main reasons for the extension is the recent announcement that FedLoans is exiting the federal servicing business as early as mid-December. FedLoans services loans for about 8.5 million federal borrowers, and we don’t yet know who will take over this business… or how long the transition will take. We wrote more on this topic HERE, and will keep you posted as things evolve, as well as provide guidance on any action items we recommend in advance of the transition.
Refinancing Rates Remain at Record Lows
The refinancing marketplace continues to offer record low rates to those who don’t have a long-term need for federal relief. Inflation and rising rates represent risks that can be mitigated by locking in today’s available low rates where appropriate.
In summary, the CARES Act extension does NOT mean that we can ignore the rapidly changing student loan marketplace. Even with the extended moratorium, active management and monitoring of student loan legislation and developments is critical, and we are here to serve as your advocate.
Lastly, we will continue to provide updates via these newsletters, but we also encourage you to follow us on social media where we are posting weekly. Links are at the bottom right of this page.