Loan payment

President Biden draws up plans to restart student loan payments

The Biden administration is drawing up plans for how it will restart federal student loan payments next year when the pause on monthly payments ends.

The Department for Education is considering proposals to give borrowers more options and flexibility as they face paying off a student loan for the first time in two years. Options include an initial grace period for missed payments.

Education officials are also discussing policies to make it easier for millions of borrowers to stay enrolled in income-based repayment programs, allowing borrowers to avoid a sudden increase in their monthly payment.

Plans are being drawn up to avoid an increase in delinquencies when payments resume in February 2022. Currently, more than 40 million borrowers owe $1.59 trillion in student loan repayments. The situation has also drawn political lines as progressive Democrats pressure Biden to write off widespread student loan debt since the day he was sworn in.

Education Secretary Miguel Cardona said he wanted a smooth “acceleration” for borrowers to start paying again. The department’s head of student aid, Rich Cordray, told Politico the agency is discussing a major public awareness campaign that includes paid advertising, to inform student borrowers of their options.

Education Department officials have instructed their student loan managers to create a “safety net” for borrowers in the first three months after their payments resume. Borrowers who miss a payment during the grace period would not be penalized or robbed on their credit reports.

The department also plans to contact certain groups of at-risk borrowers directly, including those who were in default before the pandemic, who never graduated from college or who have recently started repaying their loans. The department is also extending its call center hours to accommodate an expected increase in the coming months.

Another measure officials are discussing is a proposal to make it easier for borrowers to enroll in income-based repayment programs. These programs typically require borrowers to show proof of income and family size each year. This requirement was suspended during the pandemic, but now that payments are resuming, 9 million borrowers will again have to certify their income.