Loan payment

Resumption of student loan payments in February will hit ‘psychological hurdle’ as many borrowers believed their debt would be canceled, Biden official says

Richard Cordray. Alex Wong / Getty Images

  • Federal Director of Student Aid Cordray mentioned the challenges of restarting student loan payments.

  • He spoke of the “psychological barrier” for borrowers who thought their debt could be canceled.

  • The final extension of the payment break is expected to be lifted in February, but many borrowers are not ready.

  • See more stories on the Insider business page.

In February, student loan borrowers are expected to start repaying their debt on a regular basis – and they’re not ready.

The freezing of student loan payments during the pandemic has been expanded three times to give borrowers additional financial relief. But the most recent extension to February is final, and a senior education ministry official warned resuming payments would be especially difficult for borrowers who have been tricked into believing their debt will be canceled.

Richard Cordray, director of the federal student aid office at the education ministry, spoke with the education finance board last week about the challenges the ministry was facing in higher education. He said, in Remarks obtained by Politico, that the transition of tens of millions of student loan borrowers into repayment would be a significant challenge, and that the multiple extensions of the payment break have caused “enormous confusion as to what even the immediate future can do. contain”.

“At the same time, borrowers have heard a constant drumbeat about the possibility of a loan forgiveness, wholesale or piecemeal,” Cordray said. “The old adage is that ‘wish is the father of thought’, and we can expect that many, many borrowers will not be eager to return to repayment when they have been made to believe, or even hopefully, that was never going to overcome this psychological hurdle with millions of Americans can be a lot harder job than we think. “

The payment break was first extended under President Donald Trump’s CARES Act last March, and President Joe Biden extended it twice since taking office, along with a campaign pledge according to him. which he would write off $ 10,000 in student debt per person. He has since canceled about $ 9.5 billion in student debt – Less than 1% of the $ 1.7 trillion student debt crisis – for targeted groups of borrowers, with no word on the progress of large-scale debt cancellation.

Cordray pointed out that borrowers have “grown used” to not paying off student debt for nearly two years, and that many still weren’t ready to revert to monthly payments with the pandemic still in effect.

“The stakes are extremely high as we move on to change everything again – for borrowers who may dislike what they hear from us, may disbelieve what they hear from us, and may not be ready. to face what they are our news, ”Cordray said.

The FSA plans to launch a communications campaign, Cordray said, to help facilitate loan repayments for borrowers, including email and social media outreach and updated sections on the student aid website.

But even with the FSA’s acknowledgment of repayment problems, many borrowers know they won’t be able to pay off their debt in February. Initiated already spoken with Gwen Carney, a 61-year-old single grandmother who is raising three grandchildren, who said she “really isn’t expecting February at all.”

“Restarting payments makes me very anxious because I somehow have to find that extra $ 200,” Carney told Insider. “I just don’t have it.”

Alexandria Mavin, another student loan borrower, Recount Insider that the pandemic payment break allowed her to pay her postpartum medical bills, and she saw student debt cancellation as the only way out of the “never-ending cycle” of repayment.

Massachusetts Senator Elizabeth Warren and Senate Majority Leader Chuck Schumer are lead the push for Biden to write off $ 50,000 in student debt per person, remaining adamant that he can do so immediately through executive action.

“The president has the power to write off $ 50,000 in student loan debt right now,” Warren said previously. Recount Initiated. “Senator Schumer and I are going to keep pushing for this, but Biden does not need any permission from Congress. He has to take the pen and do it himself.”

Do you have a story to share about student debt or student debt cancellation? Email Ayelet Sheffey at [email protected]

Read the original article on Business intern

Leave a Reply

Your email address will not be published.