Will the Federal Student Loan Pause Be Extended Again in 2021?

Ben Luthi

The coronavirus pandemic has crippled the U.S. economy, causing tens of millions to lose their jobs and file for unemployment benefits.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act created a few ways to stimulate the economy and also assist struggling taxpayers, including some benefits for student loan borrowers.

Those benefits officially end on Dec. 31, 2020, but some have wondered if they’ll extend into 2021 or if any other form of relief is on the table. Here’s what you need to know.

How the CARES Act student loans benefit works

The CARES Act was passed in March 2020 and created a few different forms of relief for eligible federal student loan borrowers:

  • Federal student loan freeze: Student loan payments on eligible federal loans were paused through September 2020.
  • Collections halted: The federal government stopped the collections process on loans that are in default.
  • No interest: During the federal student loan pause period, eligible borrowers also had their interest rates dropped to zero, which means they don’t have to worry about accruing interest.

Before those benefits were set to expire in September, President Trump directed the Secretary of Education, Betsy DeVos, to extend the benefits through the end of the year. This means that if you have federal Direct Loans, you’ll get a minimum of nine months without payments.

Unfortunately, though, not all student loan borrowers got to benefit from the provision. According to the Institute for College Access & Success, 12% of federal student loans (in terms of dollars) are ineligible. Also, if you have private student loans, they’re not included because the government isn’t your lender and doesn’t have control over your balances.

That said, the CARES Act student loans provision is significant because it acknowledges the heavy burden student loans have on individual taxpayers and the economy as a whole. If you’ve benefited from the federal student loan freeze, you’ve been able to use that cash flow for other purposes, such as living expenses, saving, paying down other debts and more.

And if you’ve lost your job, the federal student loan pause has simply made unemployment a little less stressful.

Will the federal student loan pause extend into 2021?

It’s difficult to say at this point whether the federal student loan freeze will be extended once again. President Trump, who made the decision to extend the benefits through the end of the year, will not continue to a second term, and it’s unclear whether he’ll make that decision as a lame-duck president.

President-elect Biden has made some progressive remarks about the student loan debt crisis, with proposals to improve student loan forgiveness options, reduce monthly payments even more on income-driven repayment plans and more.

There has even been talk of President-elect Biden being able to unilaterally forgive $50,000 in student loan debt — however, experts say this isn’t true and that Congress will still need to grant Biden that power. So if you’re wondering if there will be student loan forgiveness in 2021, that’s still up in the air.

But because of Biden’s more progressive approach to student loans, it’s possible that he will choose to extend the federal student loan pause if President Trump does not.

Keep in mind, though, that President-elect Biden will not officially enter the White House until Jan. 20, 2021, which is a few weeks after the current federal student loan freeze ends. So if the current president doesn’t extend it, you’ll likely still need to make a payment in January.

How to get a lower student loan payment and rate with refinancing

If you’re taking advantage of a federal student loan freeze, it may be best to continue to enjoy those benefits while they last. However, if your loans are ineligible for the CARES Act provision or the government decides not to extend it at the end of the year, you may want to consider student loan refinancing as a way to tackle your student loans.

Student loan refinancing allows you to pay off one or more student loans with a new one through a private lender. There are several benefits to refinancing your student loans, including:

  • You could qualify for a lower interest rate than what you’re paying now, which can lower your monthly payment and save you on total interest charges.
  • You could also extend your repayment term and get a lower monthly payment that way.
  • If you can afford it, you can shorten your repayment term and pay off your debt early.
  • You’ll have the option to choose your lender based on a variety of factors.

That said, student loan refinancing isn’t for everyone. While some lenders have relatively low income and credit score requirements, you’ll need excellent credit and a solid income (or a cosigner with those attributes) to qualify for the best terms.

Also, refinancing federal student loans will result in you losing access to certain programs, including student loan forgiveness and income-driven repayment plans.

If you’re considering refinancing your student loans, use the Purefy Compare Rates tool to shop around and compare loan offers from multiple lenders all in one place.

The bottom line

The federal student loan pause has had a significant impact on student loan borrowers, providing relief worth hundreds of dollars per month for many people. However, it’s currently unclear whether those benefits will be extended before they end at the end of the year.

If they’re not, it’s possible for President-elect Biden to pick them back up again when he formally assumes his office, but it’s no guarantee.

If your student loans aren’t eligible for the CARES Act provision or you simply want to start planning for when the federal student loan freeze ends, consider refinancing as a way to achieve your goal with your student loans.

The process has many benefits and some potential drawbacks, though, so it’s important to do your research and consider all of your options before you decide. If you qualify, though, it can give you the chance to gain some more control over your repayment plan and potentially save money along the way.

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