A student loan payment break forever? Pressure mounts on Biden
BY Lake Sydney05 January 2022, 16:35
President Joe Biden meets with members of the White House COVID-19 Response Team at the Eisenhower Executive Office Building in Washington, DC in January 2022.
Ting Shen—Bloomberg/Getty Images
Ahead of the holidays, President Joe Biden announced that the freeze on federal student loan repayments would be extended again, this time until May 1, 2022. Previously, the freeze was set to end in late January, but the Omicron variant of La COVID-19 continues to weigh on the economy.
“We know that millions of student borrowers are still dealing with the effects of the pandemic and need more time to resume payments,” Biden said in a Dec. 22, 2021 statement. “Given these considerations, My administration today extends the pause on federal student loan repayments for an additional 90 days — through May 1, 2022 — as we manage the ongoing pandemic and further strengthen our economic recovery.”
As the extension adds to the reprieve for federal student loan borrowers, proponents of debt forgiveness continue to press for greater forbearance. Democrats, including Senate Majority Leader Chuck Schumer, Senator Elizabeth Warren and Representative Ayanna Pressley, argue that resuming payments could be detrimental to our post-COVID economic recovery.
Specifically, Warren — along with other Democrats — continues to push Biden to forgive up to $50,000 in federal student loan debt per borrower. There has been some debate over the power of the president to do so, however, without an act of Congress. Warren and Schumer argue that Biden can get student debt forgiveness by executive order, but Biden and House Speaker Nancy Pelosi disagree.
“You know how I know President Biden has the power to #CancelStudentDebt? Because he has already used it. Warren tweeted on December 20, 2021. “So is President Obama, and so is Donald Trump. It’s time for the administration to cancel $50,000 in student debt and relieve the people who are being crushed.
Fortune spoke to student loan experts about whether Biden’s latest extension on federal student loan forbearance will have any effect on his future actions.
Will Biden extend the freeze again after May?
When members of the Biden administration announced the previous extension that was supposed to end in January, they called it the “final” of that extension, which turned out not to be.
“It seems to be an acknowledgment that nothing is ever truly final in our current, unpredictable environment,” said Andrew Pentis, student loan counselor and education finance expert at Student Loan Hero. Fortune.
Pentis says between inflation and Omicron “all bets are off” in terms of guessing whether the forbearance can be extended, but he thinks that’s unlikely.
Stacey MacPhetres, senior director of education funding at EdAssist Solutions, agrees, saying it’s unclear whether more extensions will be granted.
“It is widely believed that this may be the last extension, but it is impossible to say without knowing what economic indicators will occur at this time,” she says.
Does this extension indicate that Biden might consider pardon more?
Student loan experts agree Biden’s openness to further debt relief is also unclear – although Pentis does look into his ‘track record’ of student loan forgiveness, which has been made to targeted groups, including borrowers who attended now defunct institutions, borrowers with total and permanent disabilities, and public service workers.
“We have to ask ourselves: if the Biden administration did not move forward with the cancellation of student loans in the wake of worsening inflation and the Omicron variant, what exactly would it take to move that mountain?” Pentis said. “The president has clearly passed another potential turning point.”
What should borrowers do in the meantime?
MacPhetres recommends that borrowers consider continuing to make payments if they are able, which will help reduce loan principal balances, she says.
“If the administration were to move forward with full federal student loan forgiveness, any reduction in principal made by a borrower during this administrative forbearance period will benefit them in the long run,” she says. “Now is also a good time for borrowers to tackle any other debt they may have, such as additional student loans or credit card debt, with a focus on reducing those balances while taking advantage administrative forbearance of student loans.”
For borrowers who don’t have the disposable income to do so, Pentis suggests waiting until May to resume payments on federal student loans. He cautions that borrowers “shouldn’t wait to develop a repayment recovery strategy, however.”
“Biden said so himself in the announcement of the moratorium extension, which basically implies that he is throwing borrowers a bone and expecting them to do their part to prepare for spring payments. “, adds Pentis.
In his December 22, 2021 announcement, Biden warned that borrowers should prepare to start making payments in May.
“Take full advantage of Ministry of Education resources to help you prepare for the resumption of payments; review options for lowering your payments through income-tested repayment plans; exploring the cancellation of public service loans; and be sure to get vaccinated and boosted when eligible,” he said in a statement.
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