Loan payment

A definite pause in student loan payments? Pressure mounts on Biden

THROUGH Sydney Lake05 January 2022, 16:35

President Joe Biden meets with members of the White House COVID-19 response team at the Eisenhower Executive Office Building in Washington, DC, in January 2022.

Ting Shen – Bloomberg / Getty Images

Ahead of the holidays, President Joe Biden announced that the freeze on federal student loan repayments would be extended again, this time until May 1, 2022. Previously, the freeze was expected to end in late January, but Le’s Omicron variant COVID-19 continues to weigh on the economy.

“We know that millions of student loan borrowers are still facing the impacts of the pandemic and need more time to resume payments,” Biden said in a statement dated December 22, 2021. “With these considerations in mind, my administration is today extending the break in federal student loan repayments for an additional 90 days – until May 1, 2022 – as we manage the ongoing pandemic and further strengthen our economic recovery. “

While the extension adds to the reprieve for federal student loan borrowers, supporters of debt cancellation continue to push for more forbearance. Democrats, including Senate Majority Leader Chuck Schumer, Senator Elizabeth Warren and Representative Ayanna Pressley, argue that resuming payments could hurt our post-COVID economic recovery.

Specifically, Warren – along with other Democrats – continues to push Biden to write off up to $ 50,000 in federal student loan debt per borrower. There has been some debate over the president’s power to do so, however, without an act of Congress. Warren and Schumer argue that Biden can get student debt cancellation by order in council, but Biden and House Speaker Nancy Pelosi disagree.

“You know how I know President Biden has the power to #CancelStudentDebt?” Because he’s already used it. Warren tweeted December 20, 2021. “President Obama too, and Donald Trump too. It is time for the administration to write off $ 50,000 in student debt and give relief to the people who are being crushed.

Fortune spoke with student loan experts to find out if Biden’s latest extension on federal student loan forbearance will have an effect on his future actions.

Will Biden extend the freeze after May?

When members of the Biden administration announced the previous extension which was due to end in January, they called it the “final” of that extension, which it turned out not to be.

“It seems like an acknowledgment that nothing is ever quite definitive in our current and unpredictable context,” Andrew Pentis, student loans advisor and education finance expert at Student loan herorecount Fortune.

Pentis says between inflation and Omicron “all bets are off” on whether the abstention can be extended, but he thinks it’s unlikely.

Stacey MacPhetresSenior Director of Education Funding at EdAssist Solutionsagrees, saying it is unclear whether further extensions will be granted.

“It is widely accepted that this may be the last expansion, but it is impossible to say without knowing what economic indicators will occur around this time,” she said.

Does this extension indicate that Biden might consider forgiveness more?

Student loan experts agree that Biden’s openness to further debt relief is also unclear, though Pentis looks into his “history” of student loan cancellation, which has been made. to targeted groups, including borrowers who have frequented institutions now defunct, borrowers with total and permanent disabled people and public service workers.

“We have to ask ourselves: if the Biden administration did not move forward with the cancellation of student loans in the wake of worsening inflation and the Omicron variant, what exactly would it take to make it happen? is he moving this mountain? Said Pentis. “The president has clearly passed another potential turning point. “

What should borrowers do in the meantime?

MacPhetres recommends borrowers consider continuing to make payments if they are able, which will help reduce the loan principal balance, she says.

“If the administration were to go ahead with the total exemption of federal student loans, any reduction in principal made by a borrower during this period of administrative forbearance will benefit them in the long run,” she said. . “This is also a good time for borrowers to tackle any other debt they might have, like additional student loans or credit card debt, with a focus on reducing those balances while still benefiting. the administrative tolerance of student loans. “

For borrowers who do not have the disposable income to do so, Pentis suggests waiting until May to resume federal student loan payments. He warns that borrowers “should not, however, wait to develop a strategy of resumption of repayments.”

“Biden said so himself in the announcement of the moratorium extension, essentially implying that he was throwing a bone at borrowers and expecting them to do their part to prepare for the payments in the spring,” adds Pentis.

In his Dec. 22, 2021 announcement, Biden warned that borrowers should be prepared to start making payments in May.

“Take full advantage of the resources of the Ministry of Education to help you prepare for the resumption of payments; explore options for reducing your payments with income-based repayment plans; explore the cancellation of public service loans; and make sure you are vaccinated and boosted when you are eligible, ”he said in a statement.

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