Student loan pause: Biden administration extends repayment until end of August

In a statement Wednesday, President Joe Biden acknowledged that the economy is stronger than it was a year ago, but “we are still recovering from the pandemic and the unprecedented economic disruption that it has caused.” caused”.

“This additional time will help borrowers achieve greater financial security and support the Department of Education’s efforts to continue improving student loan programs,” he said.

Borrower balances have effectively been frozen for more than two years, with no payments required on most federal student loans since March 2020. During that time, interest has stopped accruing and collections on debts in default were suspended.

Biden and former President Donald Trump have taken steps to extend the hiatus. Biden previously moved the payment restart date three times.

When the Biden administration extended the September 2021 hiatus to the end of January 2022, it warned it would be the last extension. But the president pushed back the date again as Covid-19 cases were on the rise over the winter.
Recently, Biden has come under pressure from other Democrats and consumer advocacy groups to move the date again due to inflation and ongoing supply chain issues that make everyday items more expensive for households. Dozens of Democratic lawmakers sent a letter to Biden last week urging him to extend the hiatus until at least the end of the year.

who benefits

Direct Loans as well as PLUS Loans, which are available to graduate students and parents on behalf of their children, are eligible for the benefit. Certain federal loans that are guaranteed by the government but not technically owned by it, known as Federal Family Education Loans, or FFELs, were not eligible. Generally, these were disbursed before 2010.

The break on payments is even greater for those who work in the public sector and may qualify for federal student loan forgiveness after 10 years. They still receive credit for those 10 years of required payments as if they had continued to make them during the pandemic, as long as they are still working full-time for eligible employers.

A recent analysis by the nonprofit Committee for a Responsible Federal Budget found that the pause on interest and payments — from March 2020 to the previously scheduled end date of May 1, 2022 — will result in debt relief equivalent to a average of $5,500 per borrower.

The analysis notes that this relief is largely due to the halt in interest accrual and has benefited doctors and lawyers the most – who tend to borrow huge sums of money for their doctoral degrees. graduate studies. The report may underestimate the relief as it does not take into account the additional benefit that those applying for the Civil Service Loan Forgiveness receive from the payment break.

The pause costs the government about $4 billion a month, according to the Committee for a Responsible Federal Budget.

Some Democrats push for student loan cancellation

Some key Democratic lawmakers, including Senate Majority Leader Chuck Schumer of New York and Senator Elizabeth Warren of Massachusetts, have pressured Biden to write off up to $50,000 in student loan debt globally per borrower. .

Biden has made it clear during the presidential campaign that he supports some federal student debt cancellation. But since taking office, he has resisted pressure to cancel his debt himself with an executive order.

Instead, Biden urged Congress to pass legislation canceling $10,000 per borrower. He also suggested that the cancellation should exclude high-income borrowers, arguing last year that the government should not cancel the debt of people who went to “Harvard and Yale and Penn”.
The Biden administration has also expanded existing loan forgiveness programs for borrowers who work in the public sector, those who have been defrauded by for-profit colleges, and those who are now permanently disabled.
These efforts resulted in the cancellation of more than $17 billion in federal student loans, wiping out the debt of more than 700,000 borrowers.

Prepare for reimbursement

In a statement on Wednesday, the Department for Education said it will allow all borrowers whose loans have been suspended to receive a ‘fresh start’ on repayment by eliminating the impact of delinquencies and defaults. and allowing them to resume repayment in good standing.

The Department of Education has previously said borrowers can expect to receive a billing statement or other notice at least 21 days before their payment is due. Those who had automatic payments in place may need to let their loan servicing company know that they want these to continue.

If federal student loan borrowers can no longer afford their monthly payment once they resume, they may be eligible for an income-based repayment plan. Under these plans, which are based on income and family size, a monthly payment can be as low as $0 per month.

This story has been updated with additional information.

CNN’s Maegan Vazquez contributed to this report.

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