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Borrowers will not have to make payments until October 1 at the earliest, extending the already unprecedented break in payments by eight months.
When the economy began to shut down in response to the pandemic in March, Congress passed a sweeping relief bill that automatically suspends student loan payments and waives interest. The benefit was originally scheduled to expire in September, but was extended by the Trump administration until January 31.
The suspension of payments and the waiver of interest are automatic, but only apply to loans held by the federal government.
This covers about 85% of all federal student loans, including those called Federal Direct Loans and PLUS Loans that parents take out on behalf of their children. It excludes certain federal loans that are guaranteed by the government but are not technically owned by the government. In general, these were disbursed before 2010.
Balances were frozen in March 2020, although borrowers are allowed to continue making payments. Those enrolled in the Public Service Loan Forgiveness Program will still receive a credit as if they had continued to pay, as long as they are still working full time for eligible employers.
Pressure for larger movements
Progressive Democrats are already pressuring Biden to scale up and completely write off billions of dollars in student loans. Democratic Senate Leader Chuck Schumer and Massachusetts Democratic Senator Elizabeth Warren have called for canceling $ 50,000 in student loan debt per borrower, saying it would provide relief to millions of people struggling with the pandemic, boost the economy and would help reduce racial wealth. difference.
Warren argued that the education secretary had the power to cancel federal student loans, a claim supported by a memo from lawyers at Harvard Legal Services Center and its Predatory Student Loans Project.
Former Education Secretary Betsy DeVos was strongly opposed to Democrats’ debt cancellation proposals, recently criticizing politicians for putting forward “the really insidious notion of government giving” in remarks during a federal conference on student aid.
But Biden may be reluctant to unilaterally write off the debt and prefer that move be approved by Congress. It would be an unprecedented move and one that might not have the support of more moderate members of the Democratic Party. A study by the Committee for a Responsible Federal Budget found that canceling student debt would provide relatively little boost to the economy, and most of the relief would go to those with higher incomes who tend to get into more debt.
During his campaign, Biden called for the cancellation of $ 10,000 per borrower. On Tuesday, Brian Deese, his choice to lead the National Economic Council, said he continued to support Congress by passing a bill that would.
Biden did not include any student debt forgiveness in a $ 1.9 trillion relief plan he unveiled last week. But he has been pushing for this in a second economic bill he is due to introduce in February that will focus on economic recovery.
The Biden administration may be more likely to unilaterally expand more targeted loan forgiveness programs that already exist, such as one that offers relief to students who have been conned by for-profit colleges. Thousands of borrowers have applied for relief under this program, but have waited years to find out if they DeVos has blocked the processing of complaints.
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