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.
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.
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.
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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