3 signs the student loan payment suspension could be extended until 2023
Since March 2020, students in debt can take advantage of the extension. The pause on loan repayments has already been extended six times – twice by President Donald Trump and four times by President Joe Biden. Now the clock is ticking and anxious borrowers want to know if they will have to resume payments on September 1.
Many experts believe Biden will announce another extension, potentially until the end of the year or even later. “Our outlook … assumes the federal student loan payment moratorium will last through January 2023,” Anthony Noto, CEO of student lender SoFi, told investors on an Aug. 2 earnings call.
According to the Wall Street Journal, the Department of Education has also asked student loan servicers not to send new billing statements.
Here’s what you need to know about federal student loan repayments, including how long the pause will last, what other benefits it includes and whether Biden will push for more student debt forgiveness.
Three clues about student loan repayments could be suspended again
President Biden has not yet indicated whether he will suspend student debt payments again, but there are several indications that he might.
1. Inflation remains a major problem
As the country has turned its back on the coronavirus pandemic, the White House has repeatedly said decisions about suspending student loans will be driven by what’s happening with the economy. While inflation slowed in July, food, shelter and other essential services are still very high. On Aug. 10, grocery store prices rose 13.1% year over year — the biggest increase since March 1979, according to the Bureau of Labor Statistics.
And economists are still predicting that a recession could be coming.
“Excessive inflation has driven up the prices of almost everything, and most borrowers are unlikely to be able to repay their loans,” Tony Aguilar, CEO of student loan repayment app Chipper, told sister site from CNET, NextAdvisor. “A further extension also gives the White House more time to review potential pardon plans.”
2. Lenders have been asked to postpone contacts with borrowers
“The situation is that we are almost 30 days away from the expected recovery and the [Department of Education] told repairers to suspend trade-in communications for the past few months,” Scott Buchanan, executive director of the nonprofit Student Loan Servicing Alliance, told The Wall Street Journal on July 25. “Maybe the department expects the White House to once again throw the can on the road.”
Zack Friedman, CEO of online financial marketplace Mentor, wrote in Forbes that in theory, “Biden could continue to extend student loan relief through multiple executive orders, creating a student loan payment pause” for still “.” Or at least until he leaves office.
3. Another extension could appeal to young voters in the midterm elections
Despite improving job numbers and lower gas prices, Biden’s approval ratings haven’t been great heading into the midterm elections. On August 9, 55% of Americans disapproved of the president, according to Reuters.
Throwing a bone to the more than 40 million Americans with federal student loans could help bolster the appeal of Democrats on Nov. 8.
What happens to defaulting borrowers?
Federal student debt repayments have been suspended for more than two years, meaning interest has not accrued and collections on defaulted debt have been suspended.
Borrowers in default will automatically receive a “fresh start”, according to a statement from the US Department of Education. Their accounts will be restored to good standing and any defaults will be “healed”, allowing them to repair their credit and access programs such as income-contingent repayment and civil service loan forgiveness, which benefits those who work for non-profit organizations.
“During the break, we will continue our preparations to give borrowers a fresh start and ensure that all borrowers have access to repayment plans tailored to their circumstances and financial needs,” said Miguel Cardona, Secretary of the education, in a press release.
Will more student debt be forgiven?
During the campaign, Biden said he would support legislation canceling a minimum of $10,000 in federal loans per borrower. Democratic lawmakers would like to see that amount increased to $50,000, Bloomberg reported, in hopes of swaying young voters in November.
If he forgives more student debt, Biden would likely cap eligibility for people earning $125,000 or $150,000 a year.
Republicans in Congress argued that the president lacked the power to write off billions in student debt and introduced legislation to block it.
But there are signs the White House sees things differently: Following the Department of Education’s overhaul of its civil service loan forgiveness program in October 2021, more than 750,000 borrowers had their loans students go out, totaling more than $18.5 billion as of May 2022.
In 2019, Harvard Law School’s Predatory Student Loan Project filed a lawsuit against then-Education Secretary Betsy DeVos, claiming her office had blocked applications for the student advocacy program. until repaid, which allows federal student loan debt to be canceled if the borrower has been the victim of fraud. by their school.
In July, the Biden administration accepted the plaintiff’s arguments that the education secretary has “considerable discretion” to write off federal student loan debt, Forbes reported. (This month, a federal judge granted preliminary approval to a settlement that would give some 200,000 defrauded borrowers about $6 billion in debt relief.)
Whatever Biden’s decision on more student debt forgiveness, borrowers and financial institutions are eager to hear. At a White House press conference on April 28, the president said he would make a decision on canceling student debt “in the coming weeks.”
It was almost three months ago.