Federal student loan payments restarting on May 1, 2022? Don’t count on it.
Reports are out that the Education Department has instructed the companies that manage federal student loans to hold off on sending required notices to borrowers about their payments restarting on May 1—a clear indication that the Biden Administration is planning to either once again extend the payment pause or take other action to provide relief to student loan borrowers.
Politico first reported the Education Department’s move last week, and followed that report up today with another article saying that the Biden Administration may further extend the freeze on federal student loan payments for tens of millions of borrowers as the White House weighs a final decision on the issue.
Federal student loan payments have been on pause, with waived interest, since the outset of the COVID-19 pandemic, providing temporary relief to approximately 41 million borrowers carrying about $1.7 trillion in student loan debt.
Back in December, President Joe Biden extended the pause a third time through May 1, citing rising inflation and uncertainty with the Omicron variant. But Biden also took the opportunity to push for Americans with federal student loans to take advantage of burgeoning workplace student loan repayment programs.
“As we are taking this action, I’m asking all student loan borrowers to do their part as well: take full advantage of the Department of Education’s resources to help you prepare for payments to resume; look at options to lower your payments through income-based repayment plans,” Biden said at the time.
Those “income-based repayment plans” stem from Section 2206 of the CARES Act, a provision creating a temporary tax-free provision for employer student loan assistance programs. Per the provision, an employer can make up to $5,250 in student loan payments for an employee within a year. Whether those payments are made to the employee or directly to the student loan servicer, the money is considered tax-free: the employee doesn’t have to pay income taxes on this money, while the employer also gets a payroll tax exclusion on those funds.
That provision was originally intended to last only until December 31, 2020, but was extended through December 2025 under the Consolidated Appropriations Act (CAA), and legislative efforts are underway to make it permanent.
The Biden Administration continues to face pressure from some progressive lawmakers—notably Sens. Elizabeth Warren (D-MA) and Bernie Sanders (I-VT)—to cancel large amounts of student debt via executive order, bypassing the need for Congressional action.
As a presidential candidate in April, 2020, Biden pledged to “immediately cancel a minimum of $10,000 of student debt per person,” a campaign promise that hasn’t happened to date as President Biden continues to weigh his options on the student debt crisis.
White House Chief of Staff Ron Klain told Pod Save America last week that Biden will either extend payment pause again, or review actions he can take on student debt before May.
SEE ALSO:
• Biden Extends Student Loan Repayment Pause, Pushes Workplace Solutions
• Student Debt and Employee Benefits: What Plan Advisors Need to Know
• Surprising Findings on 401k Participant Student Loan Debt
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
