More than 1 million student loan borrowers in default are now eligible for pause on payments and collections

Personal finance

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The Biden administration is expanding an existing pause on student loan interest and collections to include more than 1.1 million borrowers who are in default, the U.S. Department of Education announced Tuesday.

The borrowers, whose defaulted loans are part of the Federal Family Education Loan program, were ineligible for the current payment pause and interest waiver — implemented last year by the Trump administration and extended by President Biden through September — due to being held by private entities.

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“Now those defaulted loans will be eligible,” said higher education expert Mark Kantrowitz.

The action will protect more than 800,000 borrowers who were at risk of having their federal tax refunds seized to repay a defaulted loan, according to the Education Department. This relief will be made retroactive to March 13, 2020, the start of the Covid-related national emergency.

The agency said it will work to automatically return any tax refunds seized or wages garnished over the past year. Borrowers who made voluntary payments during that time can request a refund.

Additionally, any of these loans that went into default after March 13, 2020, will be returned to good standing. The guaranty agencies that hold those loans will assign them to the Education Department and ask credit bureaus to remove the default from credit reports.

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