Edit: please stop asking questions about the new repayment plan. The rules aren't out yet. I'm not willing..nor should anyone else be...to answer questions based on the draft. As soon as the rules come out I'll post as quickly as I can and at that point will be delighted to try and answer any questions folks still have.
See the below article from politico. My understanding of this safety net is that if borrowers go past due once repayment restarts on COVID pause eligible loans and hit the 90 day past due mark..which is normally when you would be reported to the credit bureau..the Ed will instruct the servicer to place a forbearance on the accounts to cover the delinquency. Interest will still accrue. It appears they may do this for longer than the initial 90 day period after restart but it’s unclear from the article if a borrower can receive this “safety net” multiple times. Once the Ed publishes more details I will post them. Essentially this will prevent credit dings and defaults for a while. I would not count on these forbearance periods to count for pslf or idr forgiveness.
Biden administration officials are devising plans to ease the sting of requiring tens of millions of Americans to resume paying their student loans this fall for the first time in more than three years.
The Education Department in recent weeks finalized a three-month grace period for missed payments once student loans come due in October and directed loan services to be "prepared" to extend that flexibility for subsequent 90-day periods, according to two people familiar with the discussions. Once interest accrual resumes on Sept. 1, under the department’s current plans, it would continue to pile up even if borrowers miss payments.
The policy — which has been dubbed internally as a “safety net period” — would prevent borrowers who fall behind on payments from getting dinged on their credit report well into 2024, likely beyond the presidential election. It would also prevent severely delinquent borrowers from suffering the consequences of a default until 2025 at the earliest.
In addition, Education Department officials are preparing to unveil in the coming weeks, and then swiftly implement, the final version of President Joe Biden’s new loan repayment program.
The administration plans to promote that new income-driven repayment plan as a way for student loan borrowers to cut costs as monthly payments resume. Officials have rebranded the policy as the “SAVE” plan, an acronym for “Saving on a Valuable Education,” according to people familiar with the forthcoming regulation. That would ditch the Obama-era branding for the program, which had been called “REPAYE” or “Revised Pay As You Earn.”
"In spite of our opponents’ best efforts to sabotage our work to support student borrowers, we are fully committed to helping borrowers successfully navigate the return to repayment," an Education Department spokesperson said when asked for comment on the administration’s latest plans.
The deliberations within the administration over how to restart student loans have accelerated since Biden agreed to codify the end of the pandemic-related freeze on student loan payments as part of the debt ceiling deal he reached with House Speaker Kevin McCarthy earlier this month.
But looming large over the restart of payments is the Supreme Court’s decision, expected any day, on whether Biden can move ahead with outright canceling up to $20,000 of student debt. The administration argues it needs to reduce or eliminate balances for many borrowers to prevent a huge spike in delinquencies or defaults when borrowers are asked to resume making payments for the first time since the Covid-19 pandemic began.
The White House is facing intense pressure from many progressives who don’t want the administration to even entertain the idea of collecting payments until they’ve canceled a large swath of outstanding debt.
“The only acceptable order of operations is delivering student loan cancellation and then the return to repayment,” said Melissa Byrne, a student debt activist whose organization, We The 45 Million, has led demonstrations calling for debt relief outside the White House since the beginning of the Biden administration.
Republicans, meanwhile, are stepping up their criticism of the administration for what they view as slow-walking efforts to completely end the pandemic-related relief for student loan borrowers and require borrowers to repay their debts.
Louisiana Sen. Bill Cassidy, the top Republican on the Senate Education Committee, blasted the administration’s plan to avoid penalizing missed student loan payments as “a direct violation of the debt ceiling agreement” Biden signed earlier this month.
The debt ceiling law prohibited the administration from further extending the pause on student loan payment and interest beyond 60 days after June 30.
“Any well-meaning person would have assumed people were going to start paying back that which they owed the last day of August,” Cassidy said in an interview. “Now we hear it’s at least 90 days and probably longer.”
“The people who owe these debts are going to be the ones confused and without guidance,” Cassidy said. “They’re going to pay a price because the administration made a decision for short-term political gain.”
Cassidy has joined other Republicans, including House Education Chair Virginia Foxx (R-N.C.), in criticizing the Education Department for what they view as a lack of proper planning for restarting payments. The lawmakers have demanded that the agency brief them on its plans for restarting student loan payments this fall.
“The Department remains in constant contact with servicers, and we will be in direct contact with borrowers before repayment resumes,” the spokesperson said. “Engaging with servicers to ensure they are communicating directly with borrowers about successfully returning to repayment is an important part of the Department’s efforts to smoothly transition borrowers back into repayment.”
Education Department officials for several years have told federal student loan servicers to expect to provide borrowers with a three-month transitional period in which borrowers won’t be penalized for missed payments, as POLITICO has previously reported.
In recent weeks, the Education Department issued a fresh directive to loan servicers about those plans. The latest directive calls for an “initial” grace period of 90 days but leaves open-ended precisely when that flexibility would end, according to people familiar with the plans. Officials told the student loan companies they should be “prepared” to extend the grace period for additional 90-day periods.
In addition, the department told the companies to be ready, at the agency's direction, to pull borrowers who are more than 30 days behind on their loans out of delinquency and back into status once the grace period finally ends.
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