Loan payment

Chances of Biden extending student loan payment hiatus just increased – a lot

Student loan borrowers who hope President Biden will extend the current moratorium on student loan repayments have just received a huge boost.

The CARES Act, a law passed by Congress last year in response to the pandemic and recession, temporarily suspended all payments and froze all interest on federal student loans held by the government. The bill also suspended all collection activities for delinquent federal student loans. The moratorium on student loan repayments was originally supposed to last six months, but it has since been extended several times. The current extension of the moratorium ordered by President Biden is expected to end on September 30, 2021.

Several recent developments indicate that there is now a strong possibility that the student loan payment hiatus will be extended until 2022.

FedLoan Servicing Announces It Will Not Renew Student Loan Service Agreement

The Pennsylvania Higher Education Assistance Authority (PHEAA), which operates FedLoan Servicing – one of the major student loan managers in the US Department of Education – abruptly announced yesterday that it plans to suspend its federal loan management business. to students later this year. FedLoan Servicing’s contract with the Ministry expires on December 14, 2021. It will not seek any further extension or renewal of its contract.

This will have significant consequences for student loan borrowers. 8.5 million borrower accounts will need to be transferred to different student loan management companies – an often disruptive process that can cause lasting damage to borrowers in the form of lost records, missed payments, unexpected late fees and erroneous credit reports.

The student loan payment hiatus ending just six weeks before FedLoan Servicing’s contract was terminated will only exacerbate these problems and cause further confusion and disruption for borrowers as their student loans resume repayment. Student loan advocacy groups were already concerned that student loan departments were overwhelmed and unable to handle millions of borrower accounts while simultaneously resuming repayment, an unprecedented event. With 8.5 million student loan account transfers added to the mix, the results could be catastrophic for borrowers.

Student loan borrowers are not ready to resume repayment

Millions of student loan borrowers may not be able to resume repayment this fall. A investigation conducted by Student Debt Crisis and Savi found that 90% of student loan borrowers are unwilling to start repaying student loans after the moratorium ends in September.

In addition, with the spread of the Covid-19 Delta variant in various pockets of the country, the pandemic may not slow down enough to justify a resumption of student loan repayments. The Biden administration had previously suggested that a further extension of the student loan hiatus would be possible depending on the state of the pandemic. At a public event in May, Education Secretary Miguel Cardona said, “We are looking at it. Obviously, we’re always going to take the lead in what the data tells us and where we are as a country with regards to the resumption of the pandemic. [A further extension] is not out of the question.

Education Ministry officials reportedly support further extension of student loan hiatus

According to POLITICS, key officials at the U.S. Department of Education are in favor of extending the hiatus on student loan payments until at least January 2022. These officials appear to align themselves with a broad coalition of consumer rights groups and progressives in Congress who have urged the Biden administration to extend the moratorium on student loans so that there is more time to repair. and deal with major student loan programs that have been mired in administrative and bureaucratic issues for years.

“The break in student loan payments has been a huge relief for families, but it ends in 100 days,” Senator Elizabeth Warren (D-MA) said in a tweet last week. “We urge President Biden to extend it for at least 6 months to give [the U.S. Department of Education] more time to prepare, and borrowers and our economy more time to recover.

Warren, along with Senate Majority Leader Chuck Schumer (D-NY), and Representatives Ayanna Pressley of Massachusetts and Joe Courtney of Connecticut, wrote a letter to President Biden urging him to extend the moratorium. “Restarting payments … will present a significant challenge for borrowers, loan officers and the Ministry of Education, and we urge you not to let the payment break expire when borrowers are still dependent on this financial relief,” the officials wrote. They argued that Biden should extend the moratorium until March 31, 2022 or beyond, depending on the state of the economy.

Advocacy groups echoed these sentiments in a letter they sent to President Biden in March. “There is a broad consensus among borrowers, advocates, industry, regulators, law enforcement officials and lawmakers on both sides that a rush to resume student loan repayments is a recipe for success. a disaster, in the absence of significant structural reforms and real and immediate relief, such as debt. cancellation, for borrowers trapped in this failing system.

Next steps

It is ultimately up to the White House to determine whether or not to extend the student loan payment hiatus further. The Biden administration has not expressly stated whether a further extension will take place, and there has been no indication of a possible timeline for an announcement.

It’s also unclear whether the Biden administration is moving forward with a large student loan forgiveness. President Biden has asked his administration to conduct a formal legal review of the authorities that could serve as the basis for canceling student loan debt using executive power. This review is ongoing.

Further reading

Huge upheaval in student loan management: this important loan manager terminates his contract

Elizabeth Warren in Biden: Extending Student Loan Break Until 2022 or Later

Your student loan manager is changing: 7 steps to protect yourself now

Will Biden cancel student loan debt? We may know soon

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