Will you get another extension on student loan payments? What borrowers need to know

If you have student loans, you might have to start making payments again next month.

The pause on federal student loan payments is set to expire on Aug. 31, potentially marking the first time loan payments will be due since the start of the COVID-19 pandemic in 2020.

President Joe Biden has extended the pause on student loan payments multiple times, most recently in April when he announced an extension through Aug. 31. White House Press Secretary Karine Jean-Pierre confirmed in a July 27 news conference that the White House would make a policy decision by the end of August about whether the pause would be extended or terminated.

“But he’ll make a decision. He spoke to that last week, so I’ll let him speak when he’s ready,” Jean-Pierre said.

As of Aug. 2, there had been no policy announcement, and borrowers are stuck waiting for answers.

Here is what you need to know if you have federal student loan debt ahead of Aug. 31.

If student loan payments resume...

Until a policy is outlined, it is difficult to tell what exactly is going to happen once the pause on student loan payments ends, according to Cody Hounanian, executive director at Student Debt Crisis Center.

“We don’t know what restarting payments is going to look like,” Hounanian told McClatchy News. “There’s a lot of unanswered questions here.”

If the loan payments resume on Sept. 1 as planned, that does not mean that every borrower is going to receive a bill that day. The exact timeline for when payments will be due and when borrowers can enroll or re-enroll in payment plans has yet to be determined, Hounanian said.

Ahead of the potential expiration, borrowers should prepare their budgets as if payments will restart soon, according to Scott Buchanan, executive director of the Student Loan Servicing Alliance.

“Talk to your servicer. Figure out what your monthly payment is going to be, and in your budget start setting that aside and either put that into a savings account or just reserve it in your checking account,” Buchanan said. “Just pretend like you’re making that payment every month.”

If the student loan pause is extended...

Extending the moratorium will give borrowers more time to get their loans paid, regardless of their situation.

On the one hand, borrowers who have struggled to keep up with rising prices and other inflationary pressures will have the opportunity to prepare for when payments do restart, according to Hounanian.

On the other hand, borrowers who have had more financial success during the moratorium can continue “[bettering] themselves and [contributing] to their community,” he said.

However, an extension on loan payments does not mean loans will go away altogether, and borrowers should still prepare themselves to pay back their loans in the future.

“All this does is delay when you repay the loan,” Scott Buchanan, executive director of the Student Loan Servicing Alliance, told McClatchy News. “You pay the same amount back. In fact, you thought you’d be done paying off your loan in 2027, and now it’ll be 2029.”

How likely is an extension?

While nothing is for sure, experts think it’s likely that the student loan pause could be extended as a way for Democrats to gain support from younger voters in the upcoming midterm elections.

Since April, the president has received pressure from within his party to either forgive loan debt altogether or extend the existing moratorium.

“There are tens of thousands of people in my district who can’t afford to buy a home, start a business, or raise a family because of their student loan debt. We could allow this to continue, or we could cancel it, today,” Rep. Ilhan Omar, D-Minnesota said in an Aug. 2 tweet.

If Biden opts to extend the pause, he could do so for several more months, or even through next summer, according to reporting from Bloomberg.

A Department of Education spokesperson told McClatchy News that the department is continuing to watch how the pandemic and economy impact borrowers’ ability to repay their loans, and it will make a decision accordingly by the end of August.

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