Loan payment

Suspension of payment of student loans extended to borrowers in default of private loans


The federal government has extended a hiatus on student loan payments that covers more than one million people in default on loans held by private lenders, the Education Department said on Tuesday.

The ministry said about 1.14 million borrowers who default on their loans under the now defunct Federal Family Education Loans (FFEL) program will benefit from a hiatus. payment and an interest rate of 0%.

The FFEL program has enabled private lenders to provide federally backed student loans. The program ended in 2010 when the Department of Education became the sole lender of federally subsidized student loans.

President Joe Biden announced in january that federal student loan payments would remain suspended and interest rates would be set at 0% until at least September 30, extending action by former President Donald Trump’s administration. But it only applied to those whose debt was held directly by the federal government, leaving out millions of people with private student loans.

Education Secretary Miguel Cardona said on Monday that extending the payment break would help up to 800,000 borrowers who risked having their tax refunds seized to pay off a delinquent loan.

Speaking at a press briefing Monday, White House press secretary Jen Psaki said: “This step particularly protects 800,000 borrowers who risk having their tax refunds seized. actually quite an important step. “

“At a time when many student loan borrowers face economic uncertainty, we are ensuring that the relief already provided to borrowers of loans held by the Ministry is available to more borrowers who need it. of the same help so they can focus on meeting their basic needs, “Cardona says.” Our goal is to enable these distressed borrowers to get the same protections previously offered to tens of millions of people. other borrowers to help overcome the uncertainty of the pandemic. “

Advocacy groups called the measure a good start, but said it failed to help more than 5 million other borrowers in the same program, known as the Federal Family Education Loans program. .

“It’s not enough,” said Persis Yu, director of the National Consumer Law Center’s student loan assistance project. “The millions of FFEL borrowers who have not yet defaulted but who may be struggling to repay their student loans often at the expense of other vital necessities need relief.”

Democratic lawmakers, along with a group of 17 state attorneys general and consumer rights advocates have called Biden to cancel up to $ 50,000 in Federal Student Loans by Order in Council.

The president said he was supporting a $ 10,000 general rebate for federal student loan borrowers through Congressional action. At a CNN town hall on February 16, he said he was not supporting a $ 50,000 pardon.

Psaki said Biden continued to urge Congress to write off $ 10,000 in student loan debt.

“This is something that Congress could take action on, and he would be happy to sign on,” she said.

The Associated Press contributed to this story.