President Joe Biden's administration said it will extend the pause on federal student loan payments one last time, until Jan. 31, for a total of almost two years' reprieve for borrowers, USA Today reported. "This final extension will give students and borrowers the time they need to plan for restart and ensure a smooth pathway back to repayment," Secretary of Education Miguel Cardona said on Friday. Since the pandemic first struck, millions of student loan borrowers have been spared the obligation of paying on their accounts. The freeze had been scheduled to expire Sept. 30. It also included a 0% interest rate on loans, and the government had directed loan servicers to pause collection attempts. Collecting on the nation’s $1.6 trillion student loan bills is already a daunting task during normal times. Expecting borrowers to restart payments after they have been paused for nearly two years will be an even more difficult challenge. And the departure of two companies that had been running the government’s loan programs further complicates matters. Lawmakers and borrower advocates had said these colliding incidents warranted another extension of the federal student loan payment pause. Borrowers also wanted more time. In a survey conducted on behalf of the Pew Charitable Trusts, nearly two-thirds of borrowers said it would be difficult to start payments again if the moratorium lifted at September's end. Read more.
In a related Wall Street Journal editorial, Congress in March 2020 relieved borrowers from making payments on federal student loans and waived interest accumulation through last September. Like other “temporary” pandemic programs, the student loan reprieve has been repeatedly extended, first by President Trump and then Mr. Biden, even as the labor market has strengthened. Forbearance was supposed to expire at the end of September, but Education Secretary Miguel Cardona says a four-month extension is necessary to give borrowers “the time they need to plan for a restart.” They have the next two months to plan. Most don’t need that. The unemployment rate among bachelor’s degree recipients was 3.1% in July. Borrowers haven’t had to show they’ve been hurt by the pandemic to receive forbearance, and nearly 90% of the 43 million student borrowers as of March 2021 (the latest Education Department data) weren’t making payments. Forbearance is saving borrowers on average $400 per month, which many are using to invest or pay down higher-interest debt. Read more. (Subscription required.)
*The views expressed in this editorial are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.
