Biden extends Federal Student Loan Repayments through May 1

President Biden extends the pause on a student Loan for another 90 days,President Biden changed his decision on Wednesday and extended the halt on federal student loan payments till May 1 because of the ongoing repercussions of the pandemic. 

Giving his statement, he also said despite the fact that the number of jobs has increased, he understood that millions of debtors would still face difficulties to make their payments.

Biden said, “Given these considerations, today my administration is extending the pause on federal student loan repayments for an additional 90 days – through May 1, 2022 – as we manage the ongoing pandemic and further strengthen our economic recovery. Meanwhile, the Department of Education will continue working with borrowers to ensure they have the support they need to transition smoothly back into repayment and advance economic stability for their own households and for our nation.”

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Biden also urged the borrowers to ready themselves for the resumption of payments by signing up for one of the government’s income-driven repayment schemes.

Reactions from Lawmakers and Debtors

This announcement of the extension comes amid appreciation by lawmakers and borrower advocacy groups who have been trying to convince Biden to extend the halt and curb student loans by executive measures.

This postponement had begun under the reign of former President Donald Trump as the economy stalled during the initial days of Covid-19 and Biden continued it. More than 40 million Americans have gone almost two years without required payments or interest on their total $1.7 trillion in student debts. And the Education Department had said in a statement that the halt is anticipated to save around $41 million loanees about $5 billion per month.

The bureau also said that the additional time period would mitigate the likelihood of borrowers who are trailing on their payments. Education Secretary Miguel Cardona in his statement said, “As we prepare for the return to repayment in May, we will continue to provide tools and supports to borrowers so they can enter into the repayment plan that is responsive to their financial situation, such as an income-driven repayment plan.”

Biden’s Stance and Course of Action

Biden had constantly emphasized that the freeze would end on Feb. 1 but liberal Democrats and voters had requested him to either extend it or take some measures to curb their loans. Pressure increased last week to alter the course and the president acceded to it as the omicron variant of Covid-19 spread throughout the country.

White House Press Secretary Jen Psaki said in an interview on Wednesday that several factors led to the administration sustaining the pause which included the current impact of the pandemic and meetings with Vice President Kamala Harris. This decision comes when the country’s economy is experiencing inflation but the positive is the unemployment rate of 4.2% which is nearing the 3.5% rate which was in February 2020 – the month before the pandemic set in the country.

For as many as two years, most student loanees have been excused from the liability of making payments on their balances. Their interest rates have been restricted and for the millions defaulted, the collection has stopped.

Student Loan Reprieve 

Extensive loan forgiveness is not a part of the extension but “it’s more likely to occur now than at any point in past” according to Mark Kantrowitz who is an author of books of scholarships and financial help.

Part of the problem of loan reprieve is the cost which implies that any loan forgiveness would be restricted to some borrowers and would be curbed. According to Kantrowitz, forgiving up to $50,000 in loan debt per loanee would amount to more than $1 trillion. A scaled-back policy that would forgive $10,000 in loans would run $377 billion.

If that relief was restricted only to loanees with $10,000 in debt or less, that scheme would cost $75 billion. However, it would still remove the debt of a third of student loan borrowers.

Contribution of other Leaders

Certain Democrats like the Senate Majority Leader Chuck Schumer and others had requested the president to stretch the moratorium period while asking Biden to use his executive power to cancel student debt. On Wednesday, Schumer, Sen. Elizabeth Warren, D-Mass, and Rep.

Ayanna Pressley, D-Mass, lauded the extension and remarked that the pause in payment had helped borrowers to “make ends meet, especially as we overcome the omicron variant.” Besides they also urged Biden to forgive up to $50,000 in student loan per debtor. Biden’s campaign implied that he would forgive up to $10,000 per borrower. However, he has said that any such measure would have to come from Congress.

The White House does not seem to be changing its position. On Dec. 14 when questioned by a reporter where widespread debt relief was, Psaki replied, ” If Congress sends him a bill, he’s happy to sign it. They haven’t sent him a bill on that yet.”

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