On Wednesday, President Joe Biden confirmed that he is directing the Department of Education to extend the pause on federal student loan repayments through Aug. 31, 2022, confirming the long-rumored additional extension that was scheduled to expire on May 1.
The move impacts roughly 41 million Americans, but the four-month extension to August 31 is considerably shorter than what many Democrats had been requesting and also sets the stage for another fight over student loan debt relief just months before the midterm elections.
Nearly 43 million Americans owe $1.6 trillion in student debt, according to the Department of Education. The last time the moratorium was extended was in December 2021. It was first enacted under former President Trump at the onset of the pandemic in March 2020, and has now been extended five times.
“As I recognized in recently extending the COVID-19 national emergency, we are still recovering from the pandemic and the unprecedented economic disruption it caused,” President Biden said in a Wednesday statement released by the White House. “If loan payments were to resume on schedule in May, analysis of recent data from the Federal Reserve suggests that millions of student loan borrowers would face significant economic hardship, and delinquencies and defaults could threaten Americans’ financial stability.
Biden said the additional time will assist borrowers in achieving greater financial security and support the Department of Education’s efforts to continue improving student loan programs. “As part of this transition, the Department of Education will offer additional flexibilities and support for all borrowers,” the statement said.
“I’m asking all student loan borrowers to work with the Department of Education to prepare for a return to repayment, look into Public Service Loan Forgiveness, and explore other options to lower their payments.”
President Joe Biden
“I’m asking all student loan borrowers to work with the Department of Education to prepare for a return to repayment, look into Public Service Loan Forgiveness, and explore other options to lower their payments. Vice President Harris and I are focused on supporting borrowers in need, and believe that this pause will provide a continued lifeline as we recover and rebuild from the pandemic,” Biden’s statement concluded.
In a separate April 6 statement, the Department of Education said the extension will provide additional time for borrowers to plan for the resumption of payments, reducing the risk of delinquency and defaults after restart.
“During the extension, the Department will continue to assess the financial impacts of the pandemic on student loan borrowers and to prepare to transition borrowers smoothly back into repayment. This includes allowing all borrowers with paused loans to receive a ‘fresh start’ on repayment by eliminating the impact of delinquency and default and allowing them to reenter repayment in good standing,” the statement said.
The Department of Education will also continue to provide loan relief, including to borrowers who have been defrauded by their institutions and those eligible for relief through the Public Service Loan Forgiveness program. FSA will establish new partnerships to ensure that borrowers working in public service are automatically credited with progress toward forgiveness, eliminating paperwork that prevents many borrowers from getting help. FSA will also continue to transfer loans to servicers committed to working under new, stronger accountability rules.
“The Department of Education is committed to ensuring that student loan borrowers have a smooth transition back to repayment,” said U.S. Secretary of Education Miguel Cardona. “This additional extension will allow borrowers to gain more financial security as the economy continues to improve and as the nation continues to recover from the COVID-19 pandemic. It remains a top priority for the Biden-Harris Administration to support students, families, and borrowers—especially those disproportionately impacted by the pandemic. During the pause, we will continue our preparations to give borrowers a fresh start and to ensure that all borrowers have access to repayment plans that meet their financial situations and needs.”
Many Dems push student debt cancelation
Many Democrats have long advocated for canceling various levels of student loan debt, while Biden campaigned on promises of addressing the issue, specifically on canceling $10,000 in student loan debt per borrower. Many progressives want to see at least $50,000 per borrower canceled, or even wiped out altogether.
Sen. Bernie Sanders (I-VT) wants it all gone, a stance he reiterated in simple a tweet Tuesday: “Cancel student debt. All of it.”
Many other lawmakers have chimed in with their own thoughts.
“We paused student debt now more than two years ago. If we can continue to indefinitely delay student loan payment and interest, we can just as easily cancel it,” tweeted Rep. Chuy Garcia (D-IL). “We cannot continue kicking the can down the road, leaving student borrowers with the uncertainty of when this will end.”
Meanwhile, Sen. Tom Cotton (R-AR) has the opposite view, shared by many Republicans. His April 5 tweet on the latest extension: “President Biden’s perpetual student loan payment moratorium is an insult to every American who responsibly paid debts. There’s no free lunch: this reckless move puts taxpayers on the hook for billions.”
The Department of Education announced an overhaul of the federal student loan program in October that has already resulted in identifying more than 100,000 borrowers eligible for roughly $6.4 billion in relief. Though there hasn’t been widespread forgiveness, the department has canceled more than $17 billion in debt to more than 700,000 borrowers since President Biden took office.
SECURE 2.0 addresses student loans
The SECURE 2.0 retirement reform legislation recently passed by the House includes a provision that would qualify as one of the new options President Biden is promoting.
If the Senate keeps the provision, it would permit individuals the choice to pay down a student loan instead of contributing to a 401k plan, while still promoting increased retirement savings through an employer match in their retirement plan.
SEE ALSO:
• Student Loan Repayment Pause to be Extended Again?
• 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.