Banking and Finance

What to Know About Student Loan Repayment in 2021

Elizabeth
December 18, 2020

Even though President Biden’s new 2021 stimulus package doesn’t currently propose any changes to student loan forgiveness, the freeze on payments has been extended and legislators continue to pressure the incoming president to forgive up to $50,000 in student loans.


While none of the changes in Biden’s proposed stimulus package are set in stone just yet, many are wondering, “How will my student loans change in 2021?” To prepare for the changes ahead, we’ve rounded up a complete guide to student loan repayment in 2021, including the date at which the freeze on payments will be lifted.

Will Student Loans Still Be on Hold in 2021?

When Congress passed the $2.2 trillion CARES Act in March of 2020, it included a portion about student loans repayment. Currently, loans payments are paused through January 31st, 2021. This means that since March 2020, student loan borrowers haven’t been required to make payments and their loans haven’t been accruing interest. However, that was only for certain borrowers.


Federal Perkins loans, private student loans, and commercial FFEL loans weren’t included in that original loan freeze, so if you’re unsure whether or not your student loan payments are on hold, it’s best to check with your student loan provider. When you log into your payment dashboard, most providers have communicated with borrowers in the case that they are frozen.


What about a student loan repayment freeze for 2021? Legislators introduced a new act back in December that would extend the freeze until April of 2021, but nothing has been passed or confirmed as of January. 

Is Biden Going to Cancel Student Loans?

Student loan forgiveness would be one of the best and biggest gifts of 2021, right? Absolutely. But, don’t get your hopes up. Many members of both Congress and the Senate are pushing for Biden to forgive up to $50,000 in student loans for anybody who earns less than $125,000 per year. However, Biden has said it’s not likely that he’ll cancel that much student debt.


Instead, Biden has called on Congress to cancel at least $10,000 in student debt per eligible borrower. With Democrats in control of Congress, this is more likely to pass than previous acts, but there are no confirmations yet of any legislation regarding canceling student debt or even what that would entail for lenders and borrowers.


We do know that, through the Higher Education Act, the President of the United States has the power to cancel student debt via the Secretary of Education. The Higher Education Act gives the two the ability to modify, waive, or even cancel student loan responsibilities completely. Whether Biden will act on that is still unknown.

Can Your Employer Pay Your Student Loans in 2021?

Actually, yes! They can help you pay your student loans through December 31st, 2025. 


When Congress passed the Cares Act, it included a tax incentive for employers where they can make payments that are tax-free as long as they’re contributing to your student loan repayment. They can pay a maximum of $5,250 per employee and both federal and private student loans are included in this unique student loan tax incentive.


Speak with your employer about whether or not this is a good option for you and what other options you have that will benefit you both.

Student Loan Repayment Plans in 2021

During his campaign, Biden proposed a new type of Income-Based Repayment Plan. Until he’s sworn into office and can begin working on changes to legislature, however, nothing’s set in stone. Currently (pre-Biden), you have a few options for student loan repayment plans:


  • Income-Contingent Repayment (ICR): You pay 20% of your discretionary income.
  • Income Based Repayment (IBR): You pay 15% of discretionary income
  • Pay As You Earn (PAYE) and Revised Pay As You Earn (REPAYE): You pay 10% of discretionary income


Depending on your professional career, you might also be eligible for Public Service Loan Forgiveness, which is is a program that forgives the balance left on your loans after making 120 qualifying payments. To be eligible for this program, however, you need to “be employed by a U.S. federal, state, local, or tribal government or not-for-profit organization.”

What to Do if You Need Help Repaying Student Loans

First, figure out what you owe and what your options are. Federal Student Aid has a Loan Simulator which acts similarly to a loan repayment calculator and will allow you to select from a few options that best fit your situation. Whether you’re looking to repay your loans as fast as possible or are having trouble keeping up with your payments, the tool is helpful in getting answers.


Second, we suggest contacting your loan provider. Due to the economic crisis spurred by the ongoing pandemic, banks and lenders are offering financial assistance to those who need it. It’s helpful to chat with a representative who can help you understand your options. If you explain your situation, they can help direct you towards the right student loan repayment plan to fit your financial needs.

Saving for Student Loan Payments in 2021

The freeze on student loan repayments will soon be lifted and millions of Americans will have to resume their regular payments. Until then, we suggest focusing on how you can save money that will allow you to have a lump sum in your account to allocate towards student loans.


How? Using the Cheese Debit Card is one great way! Without any fee charged, you can save more by doing, well, pretty much nothing. It’s an easy way to start saving for student loan payments now while things are in a bit of a lull.


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