In all likelihood, the White House is all set to extend the moratorium on payment of federal student loans once again. The announcement will be made today as per people familiar with the matter, including a high-ranking official.
The present pause on payments is valid till 1st May. The new August 31 extension will potentially impact more than 40 million students. However, the extension is for a shorter period as requested by many Democrats.
Biden admin officials gave a hint in recent weeks that most likely they will extend the relief, telling federal student loan service providers not to send reminder notices to borrowers about their monthly payment dues.
The U.S. official further disclosed that Susan Rice, the president’s domestic policy adviser, played a pivotal role in the negotiations for securing the extension.
Federal student loans moratorium extension
Lanae Erickson, the senior vice president for social policy for Third Way, said, “There’s obviously a huge amount of pressure, including from the Senate majority leader, to just cancel student loans.
The payment pause has just become inextricably linked with the canceling student loan conversation and makes it all the more politically dicey for the administration.”
Many Democrats have requested for extension of the pause on payments through at least the end of this year, just before the midterm elections. Recently in the month of March 2022, more than 100 lawmakers led by Senator Elizabeth Warren and Majority Leader Chuck Schumer drafted a letter to Biden requesting him to extend the moratorium on payments.
Mike Pierce, Student Borrower Protection Center Executive Director said, “Tens of millions of people with student debt are once again in limbo as Washington plays politics with borrowers’ financial lives. Joe Biden needs to keep his promises to fix the broken student loan system and cancel student debt. As voters head to the polls in November, they will not settle for anything less.”
COVID-19 and CARES Act
Ever since the coronavirus pandemic hit the US and the entire world in March 2020, monthly payments and interest have been put on hold for the majority of the federal student loans when Congress passed the CARES Act. Since then, former US President Donald Trump and current president Joe Biden’s administration have further extended the relief using executive action.
According to the Biden administration, it is estimated that borrowers will save approximately $5 billion collectively each month in interest that does not accrue on their loans.
A few private student loan service providers have been lobbying with the Biden administration to stop the program and restart federal student loan payments for borrowers as their business has been severely impacted by the pandemic relief.
They have urged for a partial extension of the pandemic relief with an aim to provide relief only to borrowers who are finding it tough to make payments.
Loan service providers’ dilemma
Last month, Ron Klain, Mr. Biden’s chief of staff, said, “Joe Biden, right now, is the only president in history where no one’s paid on their student loans for the entirety of his presidency.
The question of whether or not there’s some executive action on student debt forgiveness, when the payments resume, is a decision we’re going to take before the payments resume.”
Service providers have onboarded additional staff in the anticipation that payments would resume from 1st May onwards. However, few executives have expressed frustration as it is evident that they will have to delay their collection efforts once again.
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