Student Loan Payments Are Supposed To Resume In September. Is Another Pause Coming?
The White House is still deciding whether to extend the ongoing moratorium on student loan payments, which were first paused in March 2020 as the coronavirus pandemic took hold in the US.
They’ve been rescheduled six more times since then by the Trump and Biden administrations, though they’re set to resume in September.
“The Department of Education will continue to assess the impacts of the COVID-19 pandemic and the economy on student loan borrowers,” a spokesperson told CNN on July 25. The rep added: “The DoE will communicate directly with borrowers about the end of the payment pause when a decision is made.”
President Joe Biden is considering extending the pause through the end of the year or even until next summer, Bloomberg reported. Ahead of any announcement, the Department of Education has told student loan servicers to hold off sending out new billing statements, according to the Wall Street Journal.
The moratorium has halted payments and interest for 35 million Americans and suspended collection efforts against the 7 million borrowers currently in default. Nearly $200 billion in loans have been deferred in all, according to an analysis from the Federal Reserve Bank of New York.
Though millions of borrowers have had their student debt canceled during President Joe Biden’s term, no official decisions have been made yet on widespread student loan forgiveness. In a June 30 letter, 180 educational, community, legal and financial nonprofits urged the president to cancel more student loans before payments restarted.
Here’s what you need to know about federal student loan payments, including how long the pause could last, what other benefits it includes and whether Biden will push for more student debt forgiveness.
How long will the pause on student loan payments last?
Federal student debt repayments have been paused for more than two years, meaning interest hasn’t accumulated and collections on defaulted debts have been put on hold.
President Donald Trump first enacted the pause on student loans in March 2020 and extended it twice through January 2021. Biden has extended the pause four more times since taking office.
The Biden administration initially warned that the extension through January 2022 would be the last, but with the omicron variant of COVID-19 sweeping through the US last year, Biden decided to continue the moratorium until May 1, 2022.
Then, a March 31 letter from Senate Majority Leader Chuck Schumer, Sen. Elizabeth Warren and other top Democrats called on the White House to extend the moratorium again and provide “meaningful” debt cancellation.
“Restarting repayment will financially destabilize many borrowers and their families, and will cause hardship for many who could not afford repayment,” the letter said.
In April, Biden extended the repayment freeze once more, pausing payments until Sept. 1, 2022.
“That additional time will assist borrowers in achieving greater financial security and support the Department of Education’s efforts to continue improving student loan programs,” Biden said.
Will student loan payments be paused again?
President Biden has not indicated yet whether he will pause student debt payments again, but experts believe it’s a serious possibility.
“The situation is that we’re almost 30 days away from the planned resumption and the [Department of Education] has been telling servicers to hold off on resumption communications for the last few months,” Scott Buchanan, executive director of the nonprofit Student Loan Servicing Alliance, told The Wall Street Journal. “Maybe the department expects that the White House will yet again kick the can down the road.”
Zack Friedman, CEO of online financial marketplace Mentor,” wrote in Forbes that, in theory, “Biden could continue to extend student loan relief through multiple executive orders, creating a student loan payment pause ‘forever.'”
Or at least until he leaves office.
What about borrowers who are in default?
Borrowers in default will automatically be given a “fresh start,” according to a statement from the US Department of Education. Their accounts will be returned to good standing and any delinquency will be “cured,” allowing them to repair their credit and gain access to programs like income-driven repayment and Public Service Loan Forgiveness, which benefits those who work for nonprofits.
“During the pause, we will continue our preparations to give borrowers a fresh start and to ensure that all borrowers have access to repayment plans that meet their financial situations and needs,” Miguel Cardona, the education secretary, said in a statement.
Will Biden forgive more student debt?
While on the campaign trail, Biden said he’d support legislation canceling a minimum of $10,000 of federal loans per borrower. However, the White House has been largely silent on the issue since he took office, though the Department of Education made moves on this front in the last couple of months.
Following the department’s revamp of its Public Service Loan Forgiveness program in October, more than 750,000 borrowers have had their student loans extinguished, collectively reaching more than $18.5 billion of loan discharges as of May.
Biden is still weighing forgiving another $10,000 in student loans, Bloomberg reported, though Democratic lawmakers would like to see that amount reach $50,000, in hopes of swaying young voters in November.
If he does forgive more debt, according to the outlet, Biden would likely cap eligibility at individuals earning $125,000 or $150,000 a year.