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There are growing signs that student loan borrowers may have more time before they need to resume their payments.
For more than 16 months now, most borrower bills have been on hiatus, thanks to a break offered by the US Department of Education due to financial hardship caused by the Covid-19 pandemic. Currently, these payments are expected to start again in October.
However, an extension is under consideration, experts say.
“There’s a lot of talk about what to do here,” said Scott Buchanan, executive director of the Student Loan Servicing Alliance, a trading group for loan service companies and their subsidiaries.
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A recent change in the service of student loans could work in favor of borrowers.
The Pennsylvania Higher Education Aid Agency – which oversees the loans of 8.5 million student borrowers – announced this month that it will not renew its contract with the federal government when it ends in December. Therefore, all of these borrowers will need to be matched with a new lender.
“It would be confusing for PHEAA borrowers to start repayment on September 30, to change agents on December 14,” said higher education expert Mark Kantrowitz.
“It would be better to combine the two changes so that they happen at the same time.”
There were already signs the White House was considering an extension.
In an interview with the Education Writers Association in May, Education Secretary Miguel Cardona said the government was deciding whether to give borrowers more time beyond September.
Meanwhile, Democrats and supporters are pushing for an extension.
Senator Elizabeth Warren, D-Mass., And Senate Majority Leader Chuck Schumer, DN.Y., sent a letter in June to President Joe Biden, urging him to keep the payment break in effect until in March 2022. That would mean most borrowers would not have made a payment on their student loans in two years.
More than 120 organizations, including the American Civil Liberties Union, the National Consumer Law Center, and the Consumer Federation of America, also recently wrote to the president, asking him to extend the payment break until student debt is canceled. .
Maintaining the break until a decision on the remission is made would reduce confusion for borrowers and agents, experts say.
Biden called on the US Department of Justice and the US Department of Education to review his legal authority to write off student debt through executive action. These reports are still pending.
The decision to resume payments may also depend on the situation of borrowers as the country withdraws from the pandemic.
Those with student debt were struggling before Covid, with more than one in four in default or in default. After more than a year of record unemployment, this pain has only worsened.
The unemployment rate for those with an associate’s degree was over 5% in May, up from 2.8% before the pandemic. Nearly 3% of high school graduates remain unemployed, compared to around 2.2% before Covid.
The Congressional Budget Office recently predicted that the unemployment rate for young workers will be slower to improve than the overall rate.
“The best guess is that the payment break and interest waiver will be extended if college graduate unemployment rates have not yet normalized by September 30, 2021,” Kantrowitz said.
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