President Biden has extended the federal student loan payment pause until the end of August. This is the fourth time Biden has used executive power to extend the student loan repayment moratorium, which was set to resume on May 2.
The White House announced that the Department of Education would take action to help millions of struggling student borrowers avoid default.
How does it help borrowers?
The extension gives student borrowers a few more months to prepare for the resumption of student loan repayments. Borrowers are not required to make payments and interest rates will remain at 0%.
Before the pandemic, borrowers with student loans are automatically reinstated under the new policy. This departure from previous policy required defaulting borrowers to make nine consecutive loan repayments before applying for default.
Payment deferral applies to most federal student loan programs, including the direct loan program (subsidized and unsubsidized loans). This latest extension will keep the pause on student loan repayment, interest and collections in place.
If you’re a federal borrower, you won’t have to make any payments until the end of the semester or summer, and no interest will be charged on your balance. The relief also applies to most Parent PLUS loans and Perkins loans held by the Department of Education.
It does not apply to private loans made by banks or educational institutions.
What happens if you fail to repay a student loan?
Borrowers with delinquent federal student loans were included in the pause, which began at the start of the pandemic, and the federal government also halted collection of delinquent loans as part of the pause.
What do people think of this break?
According to borrower advocacy groups, this extension will help borrowers start afresh. The NAACP expects to forgive at least $50,000 of student debt from the Biden administration. Political parties have different views on this break. Democrats in Congress welcomed the break. But Republicans think it’s a waste of taxpayers’ money.
It’s obvious to most Americans that student borrowers welcome this break. But many who have other types of debt like auto loans think giving preference to student borrowers is a bad move. Many people are staying away from their place of work and having to borrow car loans, manage the loan and other obligations during this pandemic. They say, “Why should they cancel or extend the $50,000 student loan but not the $22,000 car loan?” Didn’t we both sign papers accepting the loan? A car is essential as we live 10 miles from the nearest town and there is no public transportation here. On the other hand, your student loan was a LUXURY purchased by YOU.
Will student loan forgiveness be the next step?
It is unclear whether student loan forgiveness is possible in the current political climate. Biden has previously supported some loan forgiveness proposals, but he has not included large-scale loan forgiveness in his key legislative proposals.
Republican congressional leaders said potential future proposals will face an uphill battle. Some advocates said Biden should use executive orders to fix the issues, but others questioned the legality of that idea. We should wait to hear if the federal government will allow some or all of the national student loan debt forgiveness.