Washington D.C. - Wednesday August 23, 2022: The U.S. Department of Education has announced what it's calling "a final extension" on the current pause in repaying student loan debt through December 31.
Repayment, interest, and collections of student loan debt will resume in January 2023.
The pause was one of the steps taken last year to ease the finical crisis brought on by the Covid epidemic. In making the announcement President Biden said the pause should be phased out responsibly so that people do not suffer unnecessary financial harm.
Debt Cancellation for Some
In addition to the pause, the Department of Education will provide targeted student debt cancellation to borrowers to borrowers with loans held by DOE if their annual income is during the pandemic was less than $125,000 for individuals; or under $250,000 for married couples or heads of households.
If you qualify and received a Pell Grant in college you will be eligible for up to $20,000 in debt cancellation. Borrowers who met those income standards but did not receive a Pell Grant will be eligible for up to $10,000 in relief.
New Repayment Rules
The Department of Education will announce further details on how borrowers can claim this relief in the weeks ahead. The Department is also proposing a rule to create a new income-driven repayment plan that will substantially reduce future monthly payments for lower- and middle-income borrowers.
The proposed rule would protect more income from loan payments. It would cut in half—from 10% to 5% of discretionary income—the amount that borrowers have to pay each month on their undergraduate loans, while borrowers with both undergraduate and graduate loans will pay a weighted average rate. It would also raise the amount of income that is considered nondiscretionary income and therefore protected from repayment.