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

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The administration is expected to announce the extension on Wednesday, the official said.

Borrowers’ balances have been effectively frozen for more than two years, with no payments required on most federal student loans since March 2020. During this time, interest has stopped accruing and debt collections have stopped accruing. in arrears have been suspended.

Both President Joe Biden and former President Donald Trump have taken steps to extend the pause. Biden had previously moved the payment restart date three different times.

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

who benefits

Direct loans and PLUS loans, which are available to graduate students and parents on behalf of their children, are eligible for the benefit. Some federal loans that are guaranteed by the government but not technically in your possession, known as Federal Family Education Loans, or FFELs, did not qualify. In general, they were disbursed before 2010.

The pause in payments is even more significant for those who work in the public sector and may be eligible 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 continue to work full-time for qualified employers.

A recent analysis by the nonprofit Committee for a Responsible Federal Budget found that pausing interest and payments, from March 2020 to the previously scheduled end date of May 1, 2022, will result in debt relief. equivalent to an 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 large amounts of money for their graduate degrees. The report may underestimate the relief because it doesn’t take into account the added benefit that those seeking PSA forgiveness receive from the payment break.

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

Some Democrats push for cancellation of student loans

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

Biden made it clear during the presidential campaign that he supported the cancellation of federal student debt. But since he took office, he has resisted pressure to write off the debt on his account with an executive order.

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

Preparing for payment

The Department of Education has said that borrowers can expect to receive a statement or other notice at least 21 days before their payment is due. Those who have set up automatic payments may need to notify their loan servicing company that they want them to continue.

If federal student loan borrowers can no longer afford their monthly payment once they resume, they may be eligible for an income-driven repayment plan. Under those 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 Vázquez contributed to this report.

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