Is All Student Loan Interest Waived? Here’s What You Need To Know

In an effort to ease the financial burden of COVID-19, the United States government put a halt on federal student loan repayments, effective March 13, 2020. In addition, the government waived student loan interest during forbearance. This meant that interest wouldn’t accrue on any loan balance, regardless of whether the borrower continued making monthly payments.

The forbearance period was intended to last until September 30, 2020, but it has taken much longer – nearly 3 years after these measures were initially put in place – for life to finally return to “normal” for the most part in the United States. However, many Americans are still dealing with the financial challenges created by the COVID-19 pandemic.

To continue to relieve some of the burden of repaying student loans – and prevent unnecessary loan defaults – the Biden administration has extended the student loan repayment pause and interest waiver into at least the summer of 2023.

So what does that mean for you as a borrower? Below, you’ll find answers to your top questions.

Federal Student Loan Interest Waiver And Repayment Suspension Overview

Federal student loan borrowers have been granted relief in the following ways:

●      Payments are currently suspended. You aren’t required to make a monthly payment on your federal student loan at this time.

●      Interest on federal student loans has been set to 0%. These loans won’t accrue interest during the forbearance period.

●      Collections on defaulted loans have been suspended, and collection agencies must pause correspondence to borrowers in default.

These measures were put in place automatically for all federal student loans and remain in effect. However, because of ongoing litigation initiated in October and November of 2022, President Joe Biden’s student loan forgiveness plan is on hold.

Still, student loan repayments are paused and borrowers aren’t expected to start making payments again until either the student loan relief program is implemented or the legal challenges are resolved. Payments will resume 60 days after either decision is made.

If a decision isn’t reached by June 30, 2023, borrowers will have to start repaying their federal student loans 60 days after this date, which is August 29, 2023.

Student Loan Debt Relief Timeline

The June 30 date isn’t the first or only deadline of the forbearance period being discussed. The deadline has been extended multiple times before and since President Biden took the oath of office. Here’s an overview of the developments in possible student loan forgiveness that have taken place under the current administration.

●      January 20, 2021: President Joe Biden is sworn into office and, as one of his first moves as president, he requests the Department of Education extend student loan relief through September 30, 2021.

●      March 13, 2021: Education Secretary Miguel Cardona announces that borrowers who were defrauded by their for-profit schools will receive full student loan forgiveness.

●      March 30, 2021: Student loan relief is offered for Federal Family Education Loans (FFEL), many of which weren’t previously included in the payment suspension or interest waiver because a commercial lender serviced them.

●      August 6, 2021: The student loan interest waiver and repayment suspension plan is extended until January 31, 2022.

●      December 22, 2021: The student loan interest waiver and repayment suspension plan is extended until May 1, 2022.

●      April 6, 2022: The student loan interest waiver and repayment suspension plan is extended until August 31, 2022.

●      August 24, 2022: The student loan interest waiver and repayment suspension plan is extended until December 31, 2022. President Biden announces his plan for cancellation of up to $20,000 in federal student loan debt for eligible borrowers. 

●      November 10, 2022: A federal judge blocks the Biden administration’s student loan forgiveness program and sets in motion a slew of legal challenges. The forgiveness program will remain in limbo until the litigation has been resolved.

●      November 22, 2022: The student loan interest waiver and repayment suspension plan is extended again. It’s anticipated that borrowers will have to resume repaying their federal student loans sometime in the second half of 2023.

Can You Continue Making Payments Even Though Student Loans Are On Hold?

You can continue making federal student loan payments even though they’re currently on hold. In fact, it’s a great idea because your full payment will go directly toward the principal rather than some of it going toward interest. This will help you pay down the loan faster. Once the forbearance period ends, your loan balance will be lower, meaning you’ll be charged less interest.

An Example Of Interest Savings

Let’s say you have a student loan balance of $10,000 with an annual interest rate of 4%. Before payments were paused and student loan interest was waived, your monthly payment was $300 – with about $42 of that paying interest. If you don’t pay anything during the forbearance (March 2020 – June 2023), you’ll have a loan balance of $10,000 when forbearance ends, and you’ll be charged about $42 per month in interest.

Now, if you’re able to keep paying $300 per month, the full $300 will go toward paying down your loan. That means the $42 you were paying in interest is applied to your loan balance instead. That’s an extra $504 per year going toward your loan balance.

If you continue making your monthly student loan payments until the forbearance is lifted, you’ll make a significant dent in the balance you owe – or possibly pay off the student loan entirely.

Is Private Student Loan Interest Suspended?

Private student loan interest isn’t waived – interest has been waived and payments have been paused for federal student loans only. The Department of Education doesn’t have the legal authority to make rules for private loans.

If you have private loans and are struggling to pay them, reach out to your lenders to see if they have any relief measures available. Here are some of the options that some private lenders have offered borrowers:

●      Forbearance up to 24 months on a case-by-case basis

●      A temporary lower interest rate

●      A temporary lower payment

●      Interest-only payments

●      1 month of payments skipped every 12 months

●      Payment postponement

Many of these options are available on a case-by-case basis and may only be available to well-qualified borrowers who’ve made consecutive on-time payments. Keep in mind, too, that many private loan relief options won’t pause interest and it may continue to accrue even if your loan goes into forbearance or you’re able to skip payments.

Make sure to do your research and work with your lender to see what’s available for you.

Student Loan Interest Waiver And Repayment Plan FAQs

With student loan interest waived, borrowers can breathe a sigh of relief for now – but you may still have questions. Here are answers to the most common ones.

Is all student loan interest waived?

Currently, all federal student loan interest is waived and payments are paused. This means that borrowers aren’t expected to make their federal student loan payments. Interest rates are also set to 0%, meaning that interest isn’t accruing while eligible student loans are in forbearance.

Are all student loans on hold?

No, the interest waiver and repayment suspension only apply to federal student loans. Private student loan payments aren’t paused, and you should still be making these payments. If you’re having trouble making your payments, discuss your options with your lender.

Is now a good time to refinance my student loans?

It may be a good time to refinance student loans if you can do so for a fairly low interest rate. However, if you have federal student loans, you likely won’t benefit from a refinance at this time.

When you refinance federal student loans, you do so through a private lender, which turns the federal loans into private loans with new terms. By doing this, you’ll lose the suspension on repayments and interest because it’s only available with federal loans.

If you’re still wondering whether to refinance your student loans, speak with a financial advisor, who can give you the best advice based on your financial situation.

How does the student loan interest waiver affect my participation in student loan forgiveness programs?

Pausing payments won’t affect your participation in student loan forgiveness programs as long as you continue to work full time for a qualifying employer during the suspension period. These programs include the Public Service Loan Forgiveness (PSLF) and Temporary Expanded Public Service Loan Forgiveness (TEPSLF) programs.

What can I do to protect myself from student loan scams?

Unfortunately, scammers see vulnerable times as great opportunities to prey on borrowers and take advantage of their stress. Many student loan scams involve a caller from an unknown number promising to pay off your student loans or immediately cancel them. If you’re unsure, here are some ways to tell if you’re dealing with a scam:

●      They charge a fee.

●      The voice on the other end is a recording.

●      They ask for personal information such as your Social Security number, FSA ID password, bank account information or credit card number.

●      They promise immediate relief.

If you think you’re being scammed or have been scammed, contact your lender and consider filing a complaint with the Consumer Financial Protection Bureau (CFPB).

When do I have to resume repaying my federal student loans?

If and when borrowers are expected to start repaying their federal student loans is dependent on the ongoing litigation over President Biden’s student debt relief program and whether the program is actually implemented.

According to Federal Student Aid, payments on federal student loans will resume 60 days after these legal challenges are resolved or Biden’s program is implemented by the U.S. Department of Education. If neither action takes place by June 30, 2023, borrowers will be required to start making their student loan payments again 60 days later.

The Bottom Line: Student Loan Payments Are Still On Hold

For now, federal student loan borrowers aren’t required to make payments on their student loans, and the loans won’t accrue interest during this forbearance period. Collections on federal student loans in default are also paused.

While not required, continuing to make payments on your loans may be a good idea because, with student loan interest waived, your full payment will go toward your principal balance. Keep in mind that borrowers may have to resume repaying their federal student loans by the summer of 2023.

If you’re currently making federal student loan payments or want to get your finances organized before the repayment pause and interest waiver are lifted, create a Rocket Money℠ account today. Our mobile app can help keep all your bills – including student loan payments – in one place so you won’t miss a payment.