Student loan payments for your federal student loans are due January 1.
Here’s what you need to know.
Absent an extension, your federal student loan payments will resume January 1, 2021.
Why? If you have student loans, then you should be aware that your federal student loans are paused through December 31, 2020. Under the Cares Act—the $2.2 trillion stimulus bill that Congress passed in March—student loan borrowers received several types of temporary student loan relief due to the Covid-19 pandemic, including:
- Pause federal student loan payments
- Set interest rates to 0%
- Halt collection of student loan debt due to default
Under the Cares Act, this student loan relief expired on September 30, 2020. However, President Donald Trump, acting through executive action, extended this student loan relief through December 31, 2020.
What’s next for your student loans? Here are 5 potential scenarios—and what they mean for your student loans:
Option 1: Student loans are due January 1, 2021
- This is the status quo option.
- If nothing else changes between now and year end, then the current, temporary student loan relief will expire as planned on December 31, 2021.
- If this happens, then your federal student loan payments resume, interest will accrue and collection of defaulted student loan debt will commence.
- Trump could extend student loan relief beyond December 31, 2020. However, since his term ends on January 20, 2021, he may choose to let the temporary student loan relief end on December 31.
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Option 2: Trump pauses student loans again
- What does Trump believe about student loans?
- Through executive order, Trump could extend student loan relief through January 20, 2021, which is the date of President Elect Joe Biden’s inauguration.
- It’s also possible he could extend student loan relief beyond that date.
Option 3: Biden does not pause student loans
- What does a Biden presidency mean for your student loans?
- Biden is expected to be inaugurated on January 20, 2021.
- If Trump further pauses student loans (or does not pause student loans), Biden could act through executive order beginning on January 20, 2021 to provide student loan relief.
- It’s possible that Biden determines temporary student loan relief for federal student loans are no longer necessary.
- Why? Jobless claims have slowed compared to earlier this year, the stock market has rebounded and borrowers will have enjoyed student loan relief for nine months.
Option 4: Biden pauses student loans (moderate)
- Biden could decide to pause student loan payments through executive order, just as Trump did.
- One possibility is that Biden pauses federal student loan payments through March 31, 2021.
- March 31 is approximately two months after Biden’s inauguration. If Biden decides to pause student loan payments, March 31 could be a possible “check in” date to assess the state of the economy and jobs market.
- Biden could then extend student loan relief beyond March 31, 2020 if he chooses, or let the temporary relief (if any) expire.
Option 5: Biden pauses student loan relief (aggressive)
- Biden could extend student loan relief for a longer period.
- For example, Biden could pause student loan payments through September 30, 2021.
- This date would be one year from the expiration of the Cares Act, and the same date that House Democrats referenced in the Heroes Act, which was Democrats’ $3 trillion proposed stimulus bill.
- This temporary student loan relief would be more aggressive compared to a March 31, 2021 extension. It also may signal that the broader economy and jobs market will not recover until then, which has other economic implications.
There are many combinations and permutations regarding student loans. Both Trump and Biden may approach student loan relief through a similar or different lens. Biden has supported Trump’s temporary student loan relief, although there is no guarantee he will pause student loan payments in 2021. At the same time, Congress may reach a stimulus deal in the Biden administration that could include some student loan relief. No matter what happens, be prepared that your student loans will come due. Start planning now so you’re not taken by surprise.
Pay off student loans
Will student loans be due January 1? Stay tuned for any extensions, including during the Trump administration or Biden administration. Most importantly, take action today to pay off student loans. This student loan relief is only temporary. Your student loan game plan should be permanent. Here are good places to start to pay off student loans, all of which have no fees: