The current break on student loan payments is set to expire on Dec. 31, 2022, following a series of extensions, which means that in four months millions of federal student loan borrowers will be on the hook for monthly payments with interest for the first time since March 2020. While the U.S. Department of Education previously stated that the forbearance period would end on Aug. 31, its most recent press release says that the extension was implemented in response to the lingering COVID-19 impacts.
The student loan payment freeze has been extended seven times since March 2020, with each extension issued for economic reasons related to the COVID-19 pandemic.
"While the economy continues to improve, COVID cases remain at an elevated level, and the President has made clear that pandemic-related relief should be phased out responsibly so that people do not suffer unnecessary financial harm," read the press release.
With broad student loan forgiveness announced at the same time, it's possible that servicers will also need time to process significant changes in borrowers' balances and, in some cases, the complete forgiveness of borrowers' loans.
At this point, it doesn't look likely that the Education Department will extend the forbearance period for the eighth time, especially due to the mass forgiveness measure. While another extension is not impossible, federal student loan borrowers should prepare to resume making regularly scheduled payments in January and be on the lookout for the forgiveness application that's expected to be released in October.
You'll receive a billing statement from your loan servicer at least 21 days before your first payment is due, and you may receive additional communication about the end of the forbearance period before that. You can use these final few months of the payment pause to make interest-free payments, focus on private student loan payments or pay down high-interest debt, like credit card debt.
However, if you're concerned about making payments again in January, you have options. If you're looking for a lower monthly payment, consider enrolling in an income-driven repayment plan or Public Service Loan Forgiveness - which has temporarily loosened its eligibility requirements through Oct. 31 - or apply for federal forbearance if you don't have the resources to start up payments. You can also think about refinancing with a private lender if you can get a lower interest rate and you aren't worried about losing federal benefits.