Federal student loan forbearance has been extended through September 30, with payments suspended and interest rates at 0%

  • Biden has extended federal student loan forbearance through September 30 by executive order. 
  • The forbearance was put in place by the CARES Act in March 2020 and has since been extended several times. 
  • Federal student loan payments will remain paused through September 30, with interest rates at 0%.
  • Connect with a financial advisor and get answers to your questions about student loans »

On Wednesday, his first day in office, President Joe Biden extended federal student loan forbearance through September 30 by executive order.

The executive order directs the Department of Education to extend the forbearance; the change is now reflected on the department's website.

In March 2020, the CARES Act set interest rates on federal student loans at 0%, suspended all payments, and paused collections on defaulted loans. Since then, the forbearance has been extended throughout 2020 and into 2021, with the most recent extension set to expire at the end of this month.

No payments due on federal student loans until at least September 30

Biden's order means payments will remain paused until September 30, though the federal government could again extend that deadline. When forbearance ends, interest rates will resume at the same rate as prior to the forbearance, and automatic payments will also resume. Remaining balances will pick up where they left off, and borrowers will owe the same amount that was due in March. 

It is possible to continue making payments on student loans during forbearance. In order to do so, borrowers will need to contact their federal student loan servicer. However, it could be a better idea to save the cash for student loan payments later on, or save in an emergency fund, financial planners say.

For anyone with loans in default or on an income-driven repayment plan, payments will also resume after September 30. All months of forbearance count towards eventual loan forgiveness.

While wage garnishing is currently paused for defaulted borrowers, it will resume with all other federal student loan payments after September 30.

These rules do not apply to private student loans. Private loans are issued and serviced by companies and banks, and don't carry the protections of the federal student loan program. Payments on these loans have still been required throughout the pandemic. Some private lenders have created programs to help borrowers who need assistance during the COVID-19 pandemic. If you're in in need, contact your lender for information on what help is available.

Disclosure: This post is brought to you by the Personal Finance Insider team. We occasionally highlight financial products and services that can help you make smarter decisions with your money. We do not give investment advice or encourage you to adopt a certain investment strategy. What you decide to do with your money is up to you. If you take action based on one of our recommendations, we get a small share of the revenue from our commerce partners. This does not influence whether we feature a financial product or service. We operate independently from our advertising sales team.

Source: Read Full Article