The Biden-Harris administration extends the student loan moratorium until August 31
WASHINGTON — According to the Associated Press, President Joe Biden intends to extend the moratorium on federal student loan payments until August 31, citing a federal official. Student debt limbo will last another three months for tens of millions of Americans.
This will be the seventh extension since the pause in March 2020. Inflation is rising, and gas prices are skyrocketing due to Russia's invasion of Ukraine. Meanwhile, the nation's $1.7 trillion student loan debt portfolio grows, with no clear path for the indebted.
The freeze saves 41 million borrowers about $5 billion per month, according to previous reports.
Though borrowers will likely appreciate the extra leeway, many have grown frustrated with the ongoing extensions without a plan for widespread forgiveness. Both conservative and liberal politicians are expected to condemn the actions of the Biden administration.
Some Democratic lawmakers, including Senate Minority Leader Chuck Schumer and Massachusetts Senator Elizabeth Warren, have urged Biden to use his executive authority to cancel up to $50,000 in student loan debt per borrower.
As recently as March 31, dozens of Democratic lawmakers wrote to President Obama, urging him to extend the moratorium until the end of the year and "provide meaningful student debt cancellation."
The extension will give borrowers more time to plan for payment resumption, lowering the risk of delinquency and default after the restart. Throughout the extension, the Department will continue to assess the financial impacts of the pandemic on student loan borrowers and plan for a smooth transition back into repayment.
This includes giving all borrowers with paused loans a "fresh start" on repayment by removing the effects of delinquency and default and allowing them to re enter repayment in good standing.
Also read: 5 ways to repay your student loan fast
In addition, the Department will continue to provide loan relief, including to borrowers who have been defrauded by their institutions and those who are eligible for relief through the Public Service Loan Forgiveness programme.
“The Department of Education is committed to ensuring that student loan borrowers have a smooth transition back to repayment,” said U.S. Secretary of Education Miguel Cardona. “This additional extension will allow borrowers to gain more financial security as the economy continues to improve and as the nation continues to recover from the COVID-19 pandemic.
It remains a top priority for the Biden-Harris Administration to support students, families, and borrowers – especially those disproportionately impacted by the pandemic. During the pause, we will continue our preparations to give borrowers a fresh start and to ensure that all borrowers have access to repayment plans that meet their financial situations and needs.”
The FSA will form new partnerships to ensure that borrowers who work in government are automatically credited with progress toward forgiveness, removing the paperwork that prevents many borrowers from receiving assistance. The FSA will also continue to transfer loans to servicers who have agreed to follow new, stricter accountability rules.
Read: All there's to know about student loan forgiveness in the US
Today's action is a series of steps taken by the Biden-Harris Administration to help students and borrowers, make higher education more affordable, and improve student loan servicing. Over 700,000 borrowers have received over $17 billion in targeted loan relief from the Department in just over a year. Among the actions within that are:
- Revamping the Public Service Loan Forgiveness program in October, which has already allowed the Department to identify more than 100,000 borrowers eligible for $6.4 billion in loan relief. As part of that effort, the Department implemented a Limited PSLF Waiver to count all prior payments made by student borrowers toward PSLF, regardless of the loan program. Borrowers who are working in public service but have not yet applied for PSLF should do so before October 31, 2022, and can find out more at StudentAid.gov/PSLF.
- Providing $7.8 billion in relief for more than 400,000 borrowers who have a total and permanent disability.
- Approving $2 billion in borrower defense claims to approximately 107,000 borrowers, including extending full relief to approved claims and approving new types of claims.
- Providing $1.26 billion in closed school discharges to 107,000 borrowers who attended the now-defunct ITT Technical Institute.
- Helping 30,000 small business owners with student loans seeking help from the Paycheck Protection Program.
What’s in it for borrowers?
- Borrowers now have until August 31 to resume payments on their federal student loans. The moratorium was set to end in May, but the administration indicated that an extension was possible in March.
- Interest on federal student loans will also remain zero, and collection efforts for past-due debts for 41 million Americans with federal student loans will be suspended.
- REQUIRE A STUDENT LOAN FORGIVENESS – According to a news release, the Education Department will allow all borrowers to restart payments without penalising previous late payments.
- "The Department of Education is committed to ensuring that student loan borrowers have a smooth transition back to repayment,” said U.S. Secretary of Education Miguel Cardona. “This additional extension will allow borrowers to gain more financial security as the economy continues to improve and as the nation continues to recover from the COVID-19 pandemic."
- The agency also stated that it would continue to assist borrowers whose universities had defrauded them. It also stated that it would streamline the Public Service Loan Forgiveness programme, a government initiative designed to provide debt relief to those employed in the public sector.
- According to the Education Department, the agency announced an overhaul of the programme in October, which has already resulted in the identification of more than 100,000 borrowers eligible for approximately $6.4 billion in relief.