More than 1 million late payment borrowers can now pause payments and collections
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The Biden administration is extending an existing break on interest and student loan collections to more than 1.1 million borrowers who are in default, the Department of Education said Tuesday.
The borrowers whose defaulted loans are part of the Federal Family Education Loan program were not eligible for the current payment hiatus and interest waiver introduced by the Trump administration last year and extended by President Biden through September because their loans were from individuals entities were held.
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“Now these defaulted loans are eligible,” said Mark Kantrowitz, an expert on higher education.
The measure will protect more than 800,000 borrowers who were at risk of having their federal tax refunds confiscated to repay a defaulted loan, according to the Education Department. This relief will be applied retrospectively to March 13, 2020, the start of the national emergency related to Covid.
The agency said it will work to automatically return the tax refunds or wages seized last year. Borrowers who made voluntary payments during this time can apply for a refund.
In addition, all of these loans defaulted after March 13, 2020 will be restored to good condition. The guarantee agencies that hold these loans assign them to the education department and ask the credit bureaus to remove the standard from credit reports.