With an 18-month suspension of federal student loan payments ending just 90 days, there are growing signs that President Biden could extend the moratorium beyond its current expiration.
The CARES Act, the stimulus bill that Congress passed last year in response to the pandemic, temporarily halted all payments on federal student loans held by the government, froze interest, and suspended all activities of recovery. The general suspension of student loan repayments was supposed to last for six months, but it has since been repeatedly extended by former President Trump and President Biden when they took office. The current extension of the moratorium is expected to end on September 30, 2021, meaning millions of student loan borrowers will resume repayment in just a few months.
So far, the Biden administration has not announced any new extensions. And it’s quite possible that student loan borrowers will actually need to resume repayment in October. But a further lengthening of the student loan payment break is nonetheless quite possible. Here’s why.
Sustained pressure to extend the suspension of student loan payments
Student loan activists and advocacy groups have sounded the alarm bells about the impending expiration of the moratorium on student loan repayments. They have three main arguments:
- Millions of student loan borrowers will not be able to abruptly resume repayment this fall, given the ongoing pandemic and uneven economic recovery. A investigation conducted by Student Debt Crisis and Savi found that 90% of student loan borrowers are not ready to resume their payments in October.
- Student loan managers will be overwhelmed and unable to handle millions of borrower accounts while simultaneously resuming repayment, an unprecedented event.
- Major federal student loan programs have historically been badly administered by loan officers and the US Department of Education, causing widespread harm to borrowers. These programs should be corrected – and at least some of the student loan debt should be canceled – before forcing borrowers to resume repayment.
A coalition of these organizations submitted a letter to President Biden last week, urging him to extend the moratorium.
Influential Democrats in Congress have also stepped up the pressure. Last week, Senator Elizabeth Warren (D-MA) joined several progressive allies in calling on President Biden to extend the moratorium on student loans until March 2022 or beyond. Other powerful Democrats have joined us recently, with Senator Patty Murray (D-WA) and Bobby Scott (D-VA), chairs of the Senate and House education committees, sending their own letter to Biden.
Extending moratorium on student loan payments is easy
Last month, the Department of Education launched a series of public hearings, the first step in a comprehensive review and possible overhaul of key federal student loan programs such as repayment plans based on the income, civil service loan forgiveness, disability releases and borrower defense for repayment. Many of these programs have been plagued with administrative and bureaucratic problems for years. But the process of reforming federal student loan programs through the regulatory process is extremely slow and tedious, requiring continued input from stakeholders and the public. Finalized regulations will likely be years away from implementation.
On the flip side, extending the moratorium on student loan payments is easy – it can be done through simple executive action, as President Biden already did on his first day in office in January. And the benefits of the extension would be immediately felt by millions of borrowers.
Extended pause in student loan repayments would save time for broader reform
The Biden administration only recently finalized appointments to key positions in the US Department of Education, with Richard Cordray patted manage the federal student aid system in May. Advocacy groups have argued that the moratorium on student loan payments should be extended to give the administration more time to pass key reforms, such as the following:
- A 90-day audit of the “brokenâPublic Service Loan Forgiveness Program and Automatic Student Debt Cancellation for borrowers who have completed ten or more years of public service, regardless of their specific compliance with the program’s complex eligibility criteria.
- Extending relief under the Borrower to Repayment Advocacy Program, which offers student loan relief to borrowers who have been defrauded by their schools. The Biden administration recently reduced the more restrictive rules made by former Education Secretary Betsy DeVos and started giving broader relief to more borrowers. But tens of thousands of borrower protection requests remain unresolved.
- Automatic resolution for borrowers in default on their federal student loans, as the CARES Act provides that months of suspended payments would count towards loan rehabilitation as if the payments were made.
- General student loan forgiveness – The Biden administration has conducted a legal review to determine whether the president has the power to unilaterally write off student loan debt on a larger scale through executive action. The results of this review are ongoing, but could be published soon.
Biden administration is open to further extension of student loan moratorium
The Biden administration has repeatedly suggested that the suspension on student loans could be extended. At a public event in May, Education Secretary Miguel Cardona said, âWe 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. More recently, Cardona said last week: âWe recognize the impact the pandemic has had on our borrowers. And extending the break is something we’ve had conversations about. “
Still, the administration has not definitively declared that a further extension is coming. And officials have not indicated when a final decision could be made or announced. In the meantime, student loan borrowers should plan to resume repayment in October, but watch for further developments.
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