Student loan payment break extended to May 1
WASHINGTON – The Biden administration on Wednesday extended a student loan moratorium that allowed millions of Americans to defer paying their debts during the pandemic.
As part of the action, payments on federal student loans will remain suspended until May 1. Interest rates will remain at 0% during this period and debt collection efforts will be suspended. These measures have been in place since the start of the pandemic, but were due to expire on January 31.
President Joe Biden has said financial recovery from the pandemic will take longer than job recovery, especially for those with student loans.
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“We know that millions of student borrowers are still dealing with the effects of the pandemic and need more time before payments can resume,” he said in a statement.
The omicron variant of COVID-19 that swept the United States with fury gave new urgency to the question of whether the moratorium would be extended. Administration officials initially said they expected the January extension to be the last. But even if the economy improves, there are concerns that borrowers may not be ready to start payments again. Once the moratorium ends, those who were already in arrears could have their wages and benefits taken away from them as part of debt collection efforts.
The policy applies to more than 36 million Americans who have student loans held by the federal government. Their collective debt stands at more than $1.37 trillion, according to the latest data from the Department of Education. About a third of borrowers are in default or delinquent, and the average monthly payment is $400 per month.
Education Secretary Miguel Cardona said in a statement that the extension will allow for repayment plans tailored to students’ financial needs, including an income-based repayment plan.
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The continued pause “will provide critical relief to borrowers who continue to face financial hardship due to the pandemic, and allow our administration to assess the impacts of omicron on student borrowers,” Cardona said.
The Trump administration initially suspended federal student loan payments in March 2020, then extended them until January 2021. Biden has now decided to pursue it twice, and the Department of Education has raised concerns. as to the effects of a sudden restart of payments, both for students and administratively within the department.
The extension of the loan moratorium comes as the decision to erase large swaths of student debt is still on the table.
Some Democrats are pushing for massive debt forgiveness. But Biden questioned whether he had the authority for this kind of mass cancellation, and legal scholars differ on this. Earlier this year, Biden asked the Departments of Education and Justice to look into the matter. Officials said work was still ongoing.
Biden has previously said he supports canceling up to $10,000 in student debt, but he argued it should be done by Congress.
Meanwhile, in October, the administration eased rules for the student loan forgiveness program already in place, dropping some of the stricter requirements for the program launched in 2007 to steer more college graduates into public service.
Biden said he was also asking all student borrowers to “do their part as well.” He said they should make full use of the resources of the Ministry of Education as they prepare for the resumption of payments, examine options to reduce payments through income-based repayment plans, explore the cancellation of public service loans and ensuring that you are vaccinated and strengthened when you are eligible.