What the Extended Student Loan Repayment Freeze Really Means for Borrowers | American Institute of Business



For over a year now, federal student loan borrowers have been enjoying a break in their payments. In March 2020, at the onset of the pandemic-induced economic crisis, President Trump enacted a moratorium on the repayment which ended the accumulation of interest and allowed all borrowers to stop paying without penalty. President Biden extended this moratorium shortly after taking office in January 2021. And last Friday, under his leadership, the Department of Education (ED) declared that the payment hiatus will continue until the end of January 2022, making it the fourth and hopefully the last extension since the start of COVID-19.

It’s a shame we needed the break in the first place. Higher education experts and policymakers have long known that the Income Based Reimbursement (IDR) program needed reform and would fail in the event of a systemic crisis. The system is complex and difficult for borrowers to navigate. And in an era when quick relief was important to both individuals and the economy, the IDR fell short.

The long-known shortfall in the IDR program has made the moratorium on loan repayments a reasonable short-term intervention. But there is no reason for this to continue. In the time saved by the payments moratorium, Congress and the White House should have consolidated the IDR program, or at the very least developed a plan to get repayment back online without burdening still vulnerable borrowers.

It is important to provide relief to borrowers who are in serious trouble. But this policy, like so many popular progressive proposals, does not target those who are really in need and provides a salary, at taxpayer expense, to many high earners.

Experts from all political persuasions to agree that the IDR needs reform and simplification, so it’s frustrating that we haven’t seen any solutions to address the immediate and long-term challenges of the student loan safety net.


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