Department of Education Extends Student Loan Forbearance For Final Time

Biden Education Dept. Announces One More Student Loan Forbearance Extension

Lisa RowanForbes Advisor Staff

Lisa Rowan is lead editor, consumer finance for Forbes Advisor. She previously served as a senior staff writer and deputy editor for the vertical. Lisa has worked as the Two Cents personal finance reporter at Lifehacker and a senior writer at The Penny Hoarder. Her first book, Money Hacks, was released in 2020. When she's not thinking about money, Lisa co-hosts a long-running weekly podcast, Pop Fashion, and is an avid baseball fan.

Lisa Rowan

Lisa RowanForbes Advisor Staff

Forbes Advisor Staff

Korrena BailieEditorial Director, Growth Projects

Korrena Bailie has over a decade of experience reporting and editing personal finance stories and reviews. Her work has been featured in Wirecutter, The New York Times, Bankrate and Credit Karma.

Reviewed

Korrena Bailie

Korrena BailieEditorial Director, Growth Projects

Korrena Bailie has over a decade of experience reporting and editing personal finance stories and reviews. Her work has been featured in Wirecutter, The New York Times, Bankrate and Credit Karma.

Editorial Director, Growth Projects

Reviewed

Updated: Aug 6, 2021, 5:00pm

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Biden Education Dept. Announces One More Student Loan Forbearance Extension

Secretary of Education Miguel Cardona speaks at a White House briefing on August 5. Getty Images

The Biden administration announced late Friday it will extend federal student loan forbearance through January 2022. It will be the “final” extension for the program, which was slated to end on Sept. 30, according to a release from the Department of Education.

Federal loan forbearance began in March 2020, amid the large-scale economic shutdown as Covid-19 cases first swept across the U.S.

Borrowers with federal loans in forbearance are not required to make payments and interest does not accrue during the program. In addition, borrowers who are working toward student loan forgiveness via public service careers don’t have to make up the time their loans are in forbearance.

And borrowers with loans in default can’t have their wages garnished during the forbearance period.

The Department of Education authorized the extension to help prepare borrowers for the new normal once their loans enter repayment again.

“As our nation’s economy continues to recover from a deep hole, this final extension will give students and borrowers the time they need to plan for restart and ensure a smooth pathway back to repayment,” Secretary of Education Miguel Cardona said in a statement Friday.

Borrowers will be notified about the extension soon, according to the department, which will promote resources to plan for repayment.

The Department of Education and some lawmakers previously recommended extending the forbearance period, in part to ease the transition for borrowers and servicers alike. But others have shared concerns that extending forbearance signals doubt about the path to economic recovery.

The Bureau of Labor Statistics released an encouraging report Friday morning, with an unemployment rate that dropped half a percentage point in July to 5.4%. But the emergence of breakthrough Covid-19 cases and new variants of the virus has put policymakers on guard and may add pressure to continue extending relief as the pandemic shows little sign of abating.

Last week, the spike in Covid cases combined with the slow dispersal of federal rental assistance funding prompted the Centers for Disease Control and Prevention (CDC) to extend its eviction ban through Oct. 3.