Loan payment

Official indications indicate the freeze on student loan payments could be extended beyond September – but questions remain

A Biden administration official today made comments suggesting that the current freeze on federal student loan payments that expires this fall may be extended. But no official decision has yet been taken.

The CARES Act, a law that Congress passed over a year ago in the early months of the global Covid-19 pandemic, has temporarily suspended all payments on federal student loans held by the government. The bill also temporarily set interest rates at zero and froze all efforts to collect delinquent federal student loans held by the government. The moratorium has been extended several times, most recently by President Biden on his first day in office. The current extension is expected to expire after September 30, 2021, which means millions of student loan borrowers are expected to resume repayment in October.

“We are continuing discussions on whether this is the best time” for borrowers to resume repayment, Education Secretary Miguel Cardona said at a Senate committee hearing earlier today, suggesting that at least another extension was possible. Cardona said there would be “no announcement today” on whether further extensions would take place, and he did not provide a timeline as to when a final decision could be made.

Student loan advocacy groups have expressed concern about the ability of millions of student loan borrowers to abruptly start repaying their loans this fall, as well as whether student loan managers have the ability to manage an unprecedented situation where millions of borrower accounts simultaneously resume repayment. at a time.

“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, ”wrote dozens of organizations in a letter to President Biden in March. “The Biden administration now has a unique chance to right the damage caused by decades of government mismanagement and industry abuse – an opportunity and an obligation that must be fulfilled before any action is taken to resume. monthly student loan payments. “

Last month, the Department of Education announced it would begin a comprehensive review and possible overhaul of key federal student loan programs, including disability releases, defending borrowers against repayment, plans for income-based repayment and forgiveness of public service loans. But the negotiated rule-making process can be painfully slow, and finalized settlements would take at least one to two years – well beyond the Sept. 30 expiration of the current moratorium on payments.

Meanwhile, the administration is conducting a legal review to determine if Biden has the power to go further and write off student loan debt on a large scale using executive action. The results of this review could be published shortly.

Further reading

Biden administration announces major overhaul of income-based repayment and student loan forgiveness programs

Will Biden cancel student loan debt? We may know soon

Biden administration to write off $ 500 million in student loan debt – Key details

Biden Student Loan Forgiveness Review: Should You Take Action Now To Write Off Student Debt Later?

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