According to the White House, millions of people in the United States who are in arrears with student loans will get a fresh start.
On April 6, the administration of President Joe Biden announced an extension of the pause on student loan payments until August 31, 2022. The extension will allow students more time to plan for the resumption of payments, the ministry said. American of Education.
The pause will also allow students to get a “fresh start” on repayment by “eliminating the impact of delinquency and default and allowing them to resume repayment in good standing,” the agency said in a statement. Press.
Here’s what that means.
About 41 million people in the United States have student loans and about 8 million are in default, Politico reported.
The agency will automatically erase “defaults for all borrowers covered by the pandemic-related pause. This includes borrowers who owe federal student loans held directly by the Department of Education as well as borrowers who have defaulted on federally guaranteed student loans issued by private lenders,” Politico reported.
“It’s important to pay the amount shown on your bill — and to pay before the due date,” according to the federal student aid office.
From the first day after a student loan payment is missed, a loan becomes delinquent – or delinquent. If a loan remains delinquent for 90 days or more, “your loan manager will report the default to the three major national credit bureaus,” the bureau says on its website.
If the loan continues to be past due, it will be in default.
When a loan is in default, the consequences can hurt a student’s financial future.
Here are some things that can happen when an account goes into default:
— The entire outstanding balance of the loan and interest due could become immediately payable.
— Borrowers could lose their eligibility for other federal student aid.
— Students’ credit ratings will be damaged, affecting their ability to buy a car or a house.
— Employers could withhold pay to send to loan holders.
In an April 6 statement, President Joe Biden said he hoped the break would allow “Americans to continue to get back on their feet after two of the toughest years this nation has ever seen.”
He added that if payments had resumed as planned in May, “millions of student borrowers would face significant economic hardship, and delinquencies and loan defaults could threaten the financial stability of Americans.”
At an April 6 press briefing, press secretary Jen Psaki said Biden hadn’t “ruled out” a large-scale student debt write-off.
Cassandre Coyer / McClatchy Washington Office