For more than two years, millions of federal student loan borrowers have not been required to repay their loans. However, the payment pause is scheduled to end on May 1, which is only 26 days away. There are increasing indications that Biden will extend the student loan payment pause once more, although nothing official has been announced. Here is the current state of affairs.
Pause in Student Loan Payments Ends in 26 Days
The CARES Act, passed by Congress in March 2020 in response to the Covid-19 pandemic, is responsible for the long-standing suspension of most student loan payments (specifically for government-held federal student loans). Additionally, the CARES Act’s student loan relief provisions suspended interest accrual and ceased all collection efforts against defaulted federal student loan borrowers.
When Congress passed the CARES Act, it anticipated six months of relief. However, as the Covid-19 pandemic and its economic consequences continued, the relief was extended several times. President Trump granted several extensions, which were quickly followed by Vice President Biden. Biden’s most recent extension will expire in a matter of weeks.
The Absence of Repayment Communications from Loan Servicers Is a Clear Sign That the Student Loan Payment Pause Will Be Extended Likely
The CARES Act requires the Department of Education to communicate with borrowers at least six times about the resumption of repayment before payments resume. As Politico first reported last month, the Department of Education quietly instructed its contracted loan servicers to cease sending notices to borrowers regarding the resumption of repayment.
Meanwhile, unlike last year, when an earlier extension was set to expire, the Department has not informed borrowers that repayment will soon resume. Democratic aides to Congress have suggested that this is a signal from the Biden administration that repayment will not resume in May.
As Politico first reported on Tuesday, the Biden administration appears to be considering extending the deadline to August 31.
The Campaign to Persuade Biden to Extend the Payment Pause is Gaining Strength
Activists, advocates, and allies for student loan borrowers have been ratcheting up the pressure on Biden to act. Last month, a broad coalition of over 200 civil rights, labour, and consumer protection organisations urged Biden to extend the payment pause, citing inflation and continued economic uncertainty. This week, hundreds of student loan borrower activists marched and protested in Washington, D.C., urging Biden to extend the payment pause and cancel student loan debt via executive action.
Meanwhile, senior Democrats in Congress have increased their pressure on Biden to also extend the payment pause. This includes Senate Majority Leader Chuck Schumer (D-NY), Senator Patty Murray (D-WA), who serves as Chair of the Senate Committee on Health, Education, Labor, and Pensions (HELP), and House Majority Whip James Clyburn (D-SC), a close Biden ally. Biden will require Congressional allies to advance his agenda this year.
Midterm Elections May Be Significant for Borrowers Seeking Loan Extensions and Forgiveness
The Biden administration may also be considering political considerations in light of this November’s midterm elections. Resuming payments in the run-up to those elections could create complications for Democrats, who hold a razor-thin majority in both the House and Senate.
According to a recent poll conducted by the Student Borrower Protection Center (SBPC), a clear majority of borrowers surveyed supported extending the student loan payment pause until at least the end of the year. Additionally, another poll released last week indicated widespread support for universal student loan forgiveness, implying that likely voters may be swayed to vote in response to actions to provide student loan relief.
Significant Modifications to Student Loan Repayment and Forgiveness Programs Could Take Another Year
The Biden administration has spent the last six months engaged in negotiated rulemaking, which is a process for overhauling critical federal student loan programmes. The administration has placed a premium on student loan forgiveness programmes such as Public Service Loan Forgiveness and has proposed a new income-driven repayment plan.
However, overhauling such programmes via new regulations takes time. And the final changes are still being hammered out, with the majority of them not taking effect until the summer of 2023. An extension of the payment suspension would provide the Biden administration with additional time to finalise these programmatic changes, which will provide borrowers with more options when repayment resumes. Indeed, Senator Murray proposed precisely this course of action last month: extending the payment pause to allow the administration to complete its overhaul of critical federal student loan programmes.
Thus, what course of action will the Biden administration take? “Clearly, a decision will need to be made” on whether to extend the payment pause and provide additional student loan relief, senior White House officials stated last week. While all indications point to an extension, borrowers continue to await official word.