The Biden administration is expected to announce an extension of the federal student loan repayment break on Wednesday, according to an administration official familiar with White House decision-making. The move would delay the repayment of student loans until August 31st. Paid payment was made earlier scheduled to end May 1st.
Approximately 37 million student loan borrowers have been in limbo for several months on whether to pause the payment break. For many of them, it would have been the first time they would have to start paying off student loans since the break at the start of the coronavirus pandemic began in March 2020.
The Biden administration has already extended the federal student loan payment pause several times. Most recently, in December, he delayed the deadline by 90 days from the end of January to May, although he stated earlier when they extended it during the summer that it would be the “final” extension.
That comes when a group of Democratic lawmakers in late March, including Senate Majority Leader Chuck Schumer, Sen. Elizabeth Warren, and House Majority Leader Jim Clyburn, sent a letter to the President asking him that it delayed the resumption of payments until at least the end of the year, noting that it saved borrowers an average of $ 393 a month during the pandemic. The same group of Democratic lawmakers has also called on the president to cancel student loan debt.
Earlier this month, White House Chief of Staff Ron Klain said the decision on whether to forgive student debt through executive action would be made before payments were resumed or the president would extend the term. pause.
“We recognize that extending the pay gap is important for borrowers struggling to cope with the damage caused by the pandemic, shocks and inflation. However, President Biden’s short-term approach is not enough to address these difficult times, “said Natalia Abrams. president and founder of the Student Debt Crisis Center. “The President has the opportunity to approve bold and significant relief rather than care measures. We urge the President to consider the transformative effect that the permanent cancellation of student debt would have on individuals, their families. and the economy. “
The federal student loan default has already resulted in $ 195 billion in exempt payments through April, the New York Federal Reserve Bank recently found.
The Committee for a Responsible Federal Budget, which had called for the resumption of student loan payments, estimated that the extension of the break would cost an additional $ 50 billion a year.
Although the Biden administration plans to extend the federal student loan repayment break, first reported by Politico, no decision has been announced on the cancellation of the student loan debt. The president has previously said he would like Congress to get involved and suggested canceling $ 10,000 in student loan debt. But tackling the forgiveness of student loans in Congress would face a tough battle with Republicans who oppose the measure.
When the deeply divided Congress may not have the support to pass student loan legislation and an executive order could face legal challenges, student financial aid expert Mark Kantrowitz has suggested that the Biden administration could go through regulatory process.
“Income-based repayment plans are effectively loan forgiveness plans,” Kantrowitz said. “They forgive the remaining debt after a few years of repayment.”
Kantrowitz argued that one of these repayment plans has a very broad regulatory authority, so the administration could create a new loan forgiveness plan and lower eligibility thresholds.
Although there has been no comprehensive cancellation of student debt since taking office, the Biden administration has canceled $ 17 billion in student loan debt, including debt forgiven for student debt. borrowers who were found to have been scammed by schools, as well as forgiving public service loans, and canceling. debt for permanently disabled borrowers.
More than 43 million borrowers have more than $ 1.6 trillion in student loan debt, according to the Department of Education. Student loan debt is the second largest amount of U.S. consumer debt behind mortgages.
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