of President Joe Biden student loan relief will provide further relief to some borrowers when payments resume in January, according to the Department of Education.
In a video released on Monday, CJ Powell, chief of staff for the Office of Post-Secondary Education, explained what borrowers can expect next year. For those who still have a balance after applying the Biden discount, the loans will be re-amortized.
This means, according to Powell, that monthly payments will be recalculated based on the borrower’s remaining balance.
“We estimate that the average borrower on a standard repayment plan will see their monthly payments drop by about $200 to $300 per month,” Powell said. “Your agent will notify you of the new amount and terms of your payment approximately 45 days before the end of the payment break.”
As part of the president’s debt cancellation, student loan repayments have been suspended for “one last time until the end of 2022. Payments have been suspended throughout the pandemic, and Democratic lawmakers have rallied the administration to extend the pause for the fifth time amid rising costs and COVID-19 hospitalizations.
A 2022 report from the Federal Reserve found that fewer student borrowers were behind on their payments in 2021 compared to fall 2019, and that more were “doing at least financially well.” The majority of borrowers also owed less than $25,000, meaning a significant portion of the debt would be wiped off Biden’s $10,000 relief for borrowers.
Before the pandemic, the average monthly payment required for borrowers eligible for the pause and potential relief was around $260, according to the Federal Reserve, with a median payment of around $170 per month. Now, the remaining borrowers who have had some of their balances written off could see considerable relief on their monthly bills, although many are still struggling with bloated debt due to soaring interest. But like Insider reports Ryan Wangmanthe overall relief will mean that borrowers will have less debt to accrue interest on.
During the pandemic, nearly 60% of those borrowers had made no payments on the loans, according to the Federal Reserve. Borrowers who made payments during the pause and qualify for relief will receive automatically refunded on all payments they have made. For some borrowers, that meant thousands of dollars to land in their bank accounts.